The nature and effects of technological change over the industry life cycle

This paper estimates quality and cost innovations in the early automobile, personal computer, rigid disk drive, computer monitor, and computer printer industries using industry-level data on firm numbers, price, quantity, and quality and an equilibrium model of industry evolution. The results challe nge the notion that new industries experience quality innovation early on a nd cost innovation later on. In the microelectronics industries the rate of quality improvement does not diminish over time. In the automobile industr y, even though the rate of quality improvement is highest early on, the pro fitability of quality advantages is highest later on. (C) 2001 Academic Pre ss.