Coevolution of Industries and Academic Disciplines

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Coevolution of Industries and Academic
Disciplines
Wharton, March 26, 2004

• Johann Peter Murmann

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Road Map for Talk

1. General Hypothesis about Coevolution of National
   Industries National Academic Disciplines
2. The Research Site Synthetic Dye Industry
   1850-1914
3. What are Evolutionary Explanations
4. Previous Research and my Definition of
   Coevolution
5. Analysis of Coevolution of Synthetic Dye Industry
   Academic Chemistry
6. Formulating a General Hypothesis from the Study
7. Contributions of the Paper Future Research

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Academic Laggard
Power-Union
Quadrant I
Quadrant II
Quadrant IV
Quadrant III
Union of the Weak
Industrial Laggard
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Explanation of Symbols
Academic discipline in particular country
Industrial sector in particular country
Academic-industrial complexes
1 2 3

n
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Co-Evolution Processes at the National Level
Time 1
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Co-Evolution Processes at the National Level
Time 2
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Co-Evolution Processes at the National Level
Time 3
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Co-Evolution Processes at the National Level
Time 4
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Key Argument of Current Paper

• Coevolutionary analysis requires two steps
• Need to show that both partners in the
  coevolutionary relationship can be conceptualized
  as populations that change through variation,
  selection, retention (VSR) processes.
• Need to specify bi-directional causal mechanisms
  that link the fate of the two populations
• a. Exchange of personnel (EP)
• b. Commercial ties (CT)
• c. Lobbying for each other (L)

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2. The Site Synthetic Dye Industry
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British and French Firms are the Leaders in Dye
Industry in 1862

Market Share
U. S.
Germany
Switzerland
France
Other
Britain
12
German Firms are Leaders in the Dye Industry in
1873

Market Share
U. S.
Germany
Switzerland
France
Other
Britain
13
German Firms Dominate World Dye Industry in 1913

Market Share
U. S.
Germany
Switzerland
France
Other
Britain
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Data Methods

• Inductive Case Method (Eisenhardt, 1989)
• Comparative historical analysis (Stinchcombe,
  1978, Tilly, 1984 Ragin, 1987, Chandler 1990)
• ?Repeated dialogue between ideas and evidence to
  develop new theories
• Constructed database of virtually all synthetic
  dye firms in the world from 1857 to 1914
• 379 distinct dye firms (648 firms in
  database)
• Studied industry and firm histories
• 6 case studies of a winner and loser in
  Britain, Germany and the U.S.
• Collected data on academic disciplines in five
  different countries.
• Studied biographies of leading industrialists and
  chemists

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2. Background Requirements for an Evolutionary
Explanation of Industrial Change

• Populations evolve not individuals
• Sources of Variation (Variation)
• Innovations
• Process of Transformation (Selection)
• Differential adoption and survival of routines in
  a population of entities
• Units of Transmission (Retention)
• Routines (standard operating procedures)
• Mechanism of Transmission (Retention)
• Social intercourse, i.e imitation

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Population of Firms at Time 2
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Population of Ideas at T2
Population of Ideas at T1
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Population of Ideas at T2
Population of Ideas at T1
Selection Filter
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Population of Firms at Time 2
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Firm at Time 2
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4. Previous Research on Coevolution
Coriat and Dosi, 1998 McKelvey, 1997 Haveman and
Rao, 1997 Barnett and Hansen, 1996 Levinthal and
Myatt, 1995 March, 1994 Baum and Singh, 1994
Rosenkopf and Tushman, 1994 Yates, 1993 Dosi
Kogut, 1993 Kieser, 1989
Burgelman, 2002 Repenning Sterman
2002 Eisenhardt and Galunic, 2000 McKelvey,
1999 Lewin and Volberda, 1999 Baum and McKelvey,
1999 Lewin et al., 1999 Van De Ven and Grazman,
1999 Rosenkopf and Nerkar, 1999 Koza and Lewin,
1998
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Diverse meanings Coevolution

• Two things are developing in parallel
• Technology and Organization
• micro and macro level (firm evolves and industry
  evolves)
• One thing that develops has a causal impact on a
  second thing that develops
• Environment and organizational forms
• Two things mutually influence each others
  development
• Two (or more) business units (Eisenhardt and
  Galunic, 2000)
• Each thing changes to a large extent through a
  selection process
• Mutualism (not only competition) is important
  coevolutionary mechanism

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My Definition of Coevolution
Two evolving populations coevolve if and only
if they have a significant causal impact on
each others ability to persist
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5. Analysis of Coevolution of Synthetic Dye
Industry Academic Chemistry
Step 1 Need to identify two populations that
change through VSR processes Population 1
firms (differing in blueprints for
action) Population 2 scientific ideas
(differing in their content)
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Specific Evolutionary Mechanisms
Industry Academia
Variation Entrepreneurs or firm members develop new action patterns Researchers propose new scientific ideas
Selection Profitable firms grow, unprofitable firms die Productive ideas attract more researchers and gain influence
Retention Blueprints for actions are stored in organizational rules and individual memory Ideas are stored in individual memory and the scientific literature
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Evidence for evolutionary change in the two
populations

• Synthetic Dye Industry from 1857 to 1914
• Percentage of firms with local formal RD
  laboratory
• Ownership structure of firms
• Percentage of firms with global sales force
• (Global market share of firms from particular
  country)
• Organic Chemistry
• Share of Organic Chemistry in the Literature of
  Chemistry
• (Global share of organic chemistry literature by
  researchers from particular country)

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Frequency of Important Firm Traits 1
of Firms with Local Formal RD Department
1860 1914
Germany 0 27
France 0 14
Britain 0 10
United States 0 0
Switzerland 0 60
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Frequency of Important Firm Traits 2
of Firms that are either Single individual
firms, Family firms Partnerships
1860 1914
Germany 100 9
France 100 14
Britain 80 30
United States 50 (1865) 0
Switzerland 100 0
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Industry Demography 1857-1914
Number of Firm Entries Number of Firm Exits Firm Failure Rates
Germany 116 91 78
France 63 55 87
Britain 47 36 77
United States 35 25 71
Switzerland 23 19 83
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Frequency of Organic Chemistry Ideas 1857-1914
Germany 1871-75 79 1891-95 88 1910-14 57
France Becomes weak in aromatic organic chemistry Becomes weak in aromatic organic chemistry Becomes weak in aromatic organic chemistry
Britain Declines after 1865 but increases somewhat after 1890s. Declines after 1865 but increases somewhat after 1890s. Declines after 1865 but increases somewhat after 1890s.
United States Weak in aromatic organic chemistry, but good in mineral soil, physical chemistry and chemical engineering Weak in aromatic organic chemistry, but good in mineral soil, physical chemistry and chemical engineering 1907 3.3
Switzerland Organic chemistry becomes dominant in the field of chemistry in the 1890s. Organic chemistry becomes dominant in the field of chemistry in the 1890s. Organic chemistry becomes dominant in the field of chemistry in the 1890s.
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Coevolutionary Analysis Step 2

• Identify bi-directional causal
• mechanisms linking
• population of industrial firms (representing
• Industries) and
• population of scientific ideas (representing
• disciplines)
• Exchange of personnel (EP)
• Commercial ties (CT)
• Lobbying for each other (L)

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Causal Relationships Connecting the two
Populations 1
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Causal Relationships Connecting the two
Populations 2
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Causal Relationships Connecting the two
Populations 3
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Causal Relationships between the Coevolving
Populations
Industry Academia
Variation Entrepreneurs or firm members develop new business actions Researchers propose new scientific ideas
Selection Profitable firms grow, unprofitable firms die Useful ideas attract more researchers and gain influence, useless ideas lose adherents
Retention Blueprints for actions are stored in organizational rules and individual memory Ideas are stored in individual memory and the scientific literature
EP,CT
EP,CT, L
EP
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British and French Firms are the Leaders in Dye
Industry in 1862

Market Share
U. S.
Germany
Switzerland
France
Other
Britain
37
German Firms are Leaders in the Dye Industry in
1873

Market Share
U. S.
Germany
Switzerland
France
Other
Britain
38
German Firms Dominate World Dye Industry in 1913

Market Share
U. S.
Germany
Switzerland
France
Other
Britain
39
German Share of Aromatic Organic Chemistry
Publications cited in France
Papers devoted to aromatics German Share
1864 14 35
1867 38 85
1870 40 96
1874 35 97
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Global Share of Organic Chemistry Publications
1877 1907
Germany 50-67 35-47
France 15.2 12.2
Britain 5.9 16.2
United States 0.9 3.6
Switzerland 7.4-24 5.0-17
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6. Generalizing the Argument

• National Industries and National Academic
  Disciplines coevolve
• This has profound implications for what industry
  and what academic discipline in a particular
  country will be strong in

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Academic Laggard
Power-Union
Quadrant I
Quadrant II
Quadrant IV
Quadrant III
Union of the Weak
Industrial Laggard
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Explanation of Symbols Used in Presentation
Academic discipline in particular country
Industrial sector in particular country
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Organic Chemistry in Different Countries
1850
No synthetic dye industry existed before 1857
Germany
France
Switzerland
United States
Britain
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Co-Evolution in the Synthetic Dye Industry
1860
Germany
France
Switzerland
United States
Britain
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Co-Evolution in the Synthetic Dye Industry
1870
Germany
France
Switzerland
United States
Britain
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Co-Evolution in the Synthetic Dye Industry
1913
Germany
France
Switzerland
United States
Britain
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Co-Evolution Processes at the National Level
Time 1
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Co-Evolution Processes at the National Level
Time 2
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Co-Evolution Processes at the National Level
Time 3
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Co-Evolution Processes at the National Level
Time 4
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7. Contributions

• 0. Strategy is also about changing the rules of
  the game.
• Industries can influence the direction of
  cognitive change in universities through
• Commercial ties
• Lobbying
• Exchange of personnel
• Firm strategy needs to be tailored to specific
  institutional environment

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Some other Cases Future Research

• Agriculture 1850-1914
• Computer Software 1950-1996
• Biotechnology 1973-2001
• These cases seem to support the coevolutionary
  hypothesis.