The evolution of market structure in semiconductors: the role of product standards

This paper looks at the role of product standards in determining the evolution of market structure in semiconductors. Theory suggests that product standards, along with learning-by-doing effects, lead to market concentration and persistence of leadership in product innovation, Empirical evidence supports this with some qualifications. The market concentration hypothesis is confirmed for all submarkets of the semiconductor industry. Persistence of leadership is obtained for markets based on proprietary product standards. In the market for microprocessors, we have persistence of leadership in product innovation that is accompanied with overall market dominance. For microcontrollers, we observe persistence of leadership in product innovation, but not concomitant overall market dominance. Whereas learning-by-doing effects seem to be strong in the small market for microprocessors, they are weaker in the much larger market for microcontrollers. (C) 2000 Elsevier Science B.V. All rights resented. JEL classification: L1; L63.