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Directions for Future Research

Combining these perspectives raises interesting research questions going forward. In some cases, these perspectives offer complementary explanations that enhance our understanding of the phenomena of interest here. In other cases, additional work is needed to tease out the contingencies that might reconcile conflicting perspectives. One common theme in all three streams of literature, but particularly in the organization ecology and evolutionary economics perspectives, is the primacy of selection over adaptation.

Organizational ecology originated because researchers wanted to identify environmental conditions rather than factors related to adaptation in determining failure rates (Hannan and Freeman, 1987, 1988). Ironically, although many evolutionary economists have implicitly moved away from the traditional structureconduct-performance paradigm and the hypothesis of equilibrium when describing industry-level phenomena, they have done the opposite when theorizing about firm performance; their models of firm survival all focus on implications of life cycle stage conditions for firm advantages and performance.

To be fair, each literature stream does attribute overall industry trends to the underlying firm conduct in terms of entry and exit from a focal industry, but there is scant attention to the conduct of firms while they are still in existence. Interestingly, several scholars examine firm evolution in parallel, with several of these studies using Nelson and Winter (1982) as a base.

For example, Helfat and Peteraf (2003) examine the capability life cycle of firms. An important area of future research will be to look at firm and industry evolution together and examine how one may affect the other. Several industry 48 RAJSHREE AGARWAL AND MARY TRIPSAS evolution studies have highlighted the role of diversifying entrants, and therefore potentially fruitful research avenues relate to linking firm strategic renewal efforts with entrepreneurial entry and creation of new industries and markets. Another important question going forward is how life cycle dynamics differ by geographic region.

How can studies of national innovation systems (e.g., Nelson, 1993) inform our understanding of industry-level phenomena? With the exception of Chesbrough (1999) and Murmann (2003), very little comparative work exists in this field. Chesbrough (1999) finds that, in contrast to Christensen and Bower’s (1996) analysis of US disk drive firms, Japanese disk drive firms were not displaced by new entrants, despite successive waves of disruptive technological change.

Chesbrough attributes these differing fates to variations in institutional factors – in particular, labor mobility, access to venture capital, and particular buyer-supplier relationships. Murmann’s (2003) detailed analysis of the synthetic dye industry in several nations shows significant differences in institutional contexts, entry and exit patterns, and innovation patterns.

Although all the countries display an inverted U-shaped curve for the number of firms over time, the timing and magnitude of the peaks differ. These results raise a number of interesting questions. Do industry life cycle patterns generally differ across countries? What are the contingencies? In what situations do specific institutional factors matter more or less? How can firms take advantage of country differences in managing innovation portfolios?

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