Patterns of Technological Entry and Exit: Evidence from France, Germany, Italy and the UK

The most recent literature on industrial dynamics is summarized, which stresses the links between industrial dynamics and technological change and shows that industries seem to develop, after a few years of existence, a core of large firms, surrounded by a fringe of smaller ones. Both entry and exit rates are much lower in the core than within the fringe. Innovations play a key role both in explaining the choice of firms to enter and in determining the survival probabilities of new entrants, as well as the growth rates of the incumbents. The paper provides additional evidence on this point by measuring the rates of technological entry, exit and growth, on the basis of patent data. The four larger European countries are compared to Japan and the US. In all countries, the patterns of technological activity mimic closely the patterns of industrial dynamics; a fringe of small and irregular ones surrounds i.e. a core of large and persistent innovators. This result confirms the links between industrial dynamics and firms’ innovation activities. However, the relative weights of the technological core and fringe vary according to the country’s innovation size (share of patents) and the technological regime. In addition, some non-size-related cross-country differences are found, which are in accordance with the literature on National Innovation Systems.