CHAPTER 1 INTRODUCTION Following Schumpeter‟S (1939
CHAPTER 1 INTRODUCTION Following Schumpeter‟s (1939) exposition of the importance of understanding the coevolution of technology, firm and industry structure, evolutionary economists have taken on this dynamics to view economic growth as a differentiating, non-linear and complex process (Nelson, 2008). Taken together, any attempt to understand firms‟ successful transformation from technological followers to leaders requires a profound unravelling of the sectoral innovation system associated with technological leaps. Economic growth, thus, is not an aggregate phenomenon; rather, it is determined by the country‟s different sectors, each characterized by its own dynamics (Nelson & Winter 1982; Nelson 2008). The integrated circuit (IC) industry has undergone major structural changes since its infancy in the 1950s, which is largely attributed to changes in firms‟ business models and technologies. The industry began life dominated by large-scale vertically integrated companies, referred to as the „integrated device manufacturers‟ (IDMs) in the United States. Born in the Bell Laboratory, ICs were first commercially produced by Fairchild. Subsequently, multinational corporations (MNCs) like Fairchild, Intel, International Business Machines (IBM), National Semiconductor and Advanced Micro Devices (AMD) internationalized their operations to East Asia since the 1960s. Since the emergence of the world‟s first pure-play foundry in Taiwan in 1987, the industry experienced a change of manufacturing landscape as firms began to vertically disintegrate to specialize in specific scopes. Since 2005, the IC industry experienced increasing stability of innovators and increasing concentration of innovations. 1 A pure-play foundry is a „dedicated‟ chip-fabrication service provider which fabricates wafers for other IC firms without its own brand name.
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