Complexity, Critical Mass and Industry Formation: A Comparison of Selected Industries

Abstract

This paper uses a typology of industries to summarize and contrast the challenges involved with industry formation and to examine why specific industries were formed in some countries before other ones. The formation of most new industries depends on the introduction of products that provide a superior “value proposition” to some set of users where their introduction requires new R&D-related capabilities in firms. However, industries whose products require a critical mass of users or complementary products for growth to continue and ones that involve complex systems face additional challenges.

Keywords:

• Complexity
• critical mass
• network effects
• location
• industry formation