The Reiter Prize Lecture By Johann Peter Murmann January 26, 2005

The Reiter Prize Lecture

By

Johann Peter Murmann

January 26, 2005

Stan Reiter: Some Early Papers

Hughes, Jonathan R. T. and Stanley Reiter (1958). "The First 1,945 British Steamships." Journal of the American Statistical Association 53(282): 360-381.

Davis, Lance E., Jonathan R. T. Hughes and Stanley Reiter (1960). "Aspects of Quantitative Research in Economic History." The Journal of Economic History 20(4): 539-547.

The Two Central Inspirations

Key Idea 1: Evolution is a General Process

An evolutionary process has three essentials:

(a) Mechanism for introducing variation(b) Consistent selection processes and (c) Mechanism for preserving and/or

propagating the selected variants

Key Idea 2 & 3What a person cannot do he or she will not do no matter how strong the urge to do it. (p. 28).

In the face of real-world complexity, the business firm turns to procedures that find good enough answers whose best answers are unknowable. (p. 28).

Key Idea 2 & 3

What a firm cannot do it will not do no matter how strong the incentives to do it.

In the face of real-world complexity, the business firm develops standard operation procedures to deal with most decision making situations.

Key Idea 4: Collect Historical Data

[T]he evolution of firms and of economies does not lead to any easily predictable equilibrium, much less of an optimum, but is a complex process, probably continuing indefinitely, that is probably best understood through an examination of its history. (p. 48).

Key Idea 5:

Many phenomena

display

a hierarchical

organization

A Four Level Hierarchy

System Level

First-order SubsystemsSecond-order SubsystemsComponent Level

The Global Economy Country Economies Industries FirmsProducts & Services

Whole

Parts

Hierarchy of Selection Processes

It is important to recognize: what are selection criteria at one level are but trials of the criteria at the next higher, more fundamental, more encompassing, less frequently invoked level (Campbell, 1974, p. 421).

The Global Economy

National Economy

Industry

Firm

Product

Key Idea 6: Sources of Success

The […] variation-and-selection-retention model unequivocally implies that ceteris paribus, the greater the heterogeneity and volume of trials the greater the chance of a productive innovation. [...] unconventionality and no doubt numerosity [are] a necessary, if not sufficient condition of creativity. (Campbell, 1960, p. 395).

The Advisor: Richard Nelson

Why Synthetic Dye Industry?

Ernst Homburg

Professor for the History of Technology

Market Share

U. S. Britain Germany Switzerland France Other

British and French Firms are theLeaders in Dye Industry in 1862

0

10

20

30

40

50

60

70

80

90

100

The Expert Predictions

A]t no distant date…[England will be] the greatest colour producing country in the world.

—August Wilhelm Hofmann (1863, p. 120) in his Report on the Chemical Section of the

International Exhibition of 1862

Market Share


German Firms are Leaders in the Dye Industry in 1873

0

10

20

30

40

50

60

70

80

90

100

Market Share


German Firms Dominate World Dye Industry in 1913

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Concentration in Each Country, 1913

Firm Country Domestic

Production

Share

Global

Market

Share

Sum of

Global

Share

Bayer Germany 22% 20.0% 20.0%

BASF Germany 22% 20.0% 40.0%

Hoechst Germany 22% 20.0% 60.0%

Levinstein U.K. 30% 2.0% 62.0%

Read Holliday U.K. 30% 2.0% 64.0%

Schoellkopf U.S. 50% 1.7% 65.7%

Heller Merz U.S. 21% 0.7% 66.4%

Number of Dye Firms by Country, 1857-1914

USA Britain Germany SwitzerlandSwitzerland France

1857 19141885

0

5

10

15

20

25

30

35

40

1857 1914

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%

Dye Development at Bayer in 1906

New dye molecules marketed 36

Dye molecules tested on larger scale 60

New dye molecules synthesized 2656

Theoretically possible dye molecules Billions

The Global Economy

National Economy

Industry

Firm

Product

Global Share of Organic Chemistry Publications

1852 1862 1877 1907

Germany 29% 38% 50-67% 35-47%

France 35% 23% 15.2% 12.2%

Britain 24% 23% 5.9% 16.2%

United States 0.9% 3.6%

Switzerland 7.4-24% 5.0-17%

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%

Three Empirical Chapters

Chapter 2:

Country-Level Performance Differences and their Institutional Foundations


Chapter 3:

Three times Two Case Studies of Individual Firms


Chapter 4:

The Coevolution of National Industries and Institutions

Final Theoretical Chapter

Chapter 5:

Toward and Institutional Theory of Competitive Advantage

Weak Academic Discipline

Strong

Weak

IndustrialSector

Strong

Typology of Academic-Industrial (A-I) Complexes

Quadrant I Quadrant II

Quadrant IVQuadrant III

Academic Laggard Power-Union

Union of the Weak Industrial Laggard

Explanation of Symbols Used in Illustration

Academic discipline in particular country

Industrial sector in particular country

Academic-industrial complexes

GermanyFrance Switzerland United StatesBritain

Organic Chemistry in Different Countries


Strong

Weak

IndustrialSector

Strong

1855


No synthetic dye industry existed before 1857

Co-Evolution in the Synthetic Dye Industry


Strong

Weak

IndustrialSector

Strong

1860




Strong

Weak

IndustrialSector

Strong

1870




Strong

Weak

IndustrialSector

Strong

1913


Co-Evolution Processes at the National Level


Strong

Weak

IndustrialSector

Strong

Time 1



Strong

Weak

IndustrialSector

Strong

Time 2



Strong

Weak

IndustrialSector

Strong

Time 3



Strong

Weak

IndustrialSector

Strong

Time 4

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The Reiter Prize Lecture By Johann Peter Murmann January 26, 2005