Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States

By William Lazonick | Go to book overview

2
The Rise of the New
Economy Business Model

ORIGINS OF THE MICROELECTRONICS REVOLUTION

Technologies that were discovered and developed by Old Economy corporations provided the essential foundations for the rise of the New Economy in ICT. During the post–World War II decades, AT&T, a regulated monopoly since 1913, dominated the communications industry. A U.S. government antitrust suit was launched in 1949 that sought to sever the exclusive relation between AT&T and Western Electric. The suit resulted in a 1956 consent decree that permitted AT&T to maintain exclusive control over its manufacturing company but barred the Bell System from competing in industries other than telecommunications. In addition, AT&T and Western Electric had to license their patents to other companies at reasonable fees (Lewis 1956). As a result, the R&D of Bell Labs, including the transistor invented there in 1947, supported the development of the ICT industries generally while the communications and computer industries remained organizationally distinct.

During the 1950s and 1960s, building on its overwhelming dominance of the punch-card tabulating machine industry, IBM came to dominate the computer industry. IBM introduced its first computer in 1952, and emerged as the undisputed leader of the computer industry within a decade. IBM grew from $166 million in revenues in 1950 to $1.8 billion in 1960, $7.5 billion in 1970, and $26.2 billion in 1980. By 1958 IBM was already the thirty-seventh largest industrial company by revenues in the United States, and a decade later it was the seventh largest. By 1963 IBM’s dominance was such that its U.S. revenues of $1,244 million from data-processing computers were well over eight times those of its nearest competitor, Sperry Rand. Indeed, the eight companies that followed IBM had combined U.S. revenues of $539 million, or only 43 percent of IBM’s (Chandler 2001, p. 86).

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Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Preface xiii
  • 1 - What Is New, and Permanent, about the "New Economy"? 1
  • 2 - The Rise of the New Economy Business Model 39
  • 3 - The Demise of the Old Economy Business Model 81
  • 4 - Pensions and Unions in the New Economy 115
  • 5 - Globalization of the High-Tech Labor Force 149
  • 6 - The Quest for Shareholder Value 197
  • 7 - Prospects for Sustainable Prosperity 249
  • References 281
  • The Author 331
  • Index 333
  • About the Institute 357
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