The learning curve, technology barriers to entry, and competitive survival in the chemical processing industries

Abstract

This paper evaluates entry and survival rates in a sample of 39 chemical product industries. The analysis focuses on learning‐based cost advantages potentially held by incumbent firms. A logit model of entry gives no evidence that entry decisions were sensitive to the cumulative production lead held by incumbents. Entry was facilitated by the fact that for most products, technology was available from a range of sources. A hazard function model reveals that entrant survival rates were unrelated to order of entry or source of process technology. However, survival was adversely affected when the leading incumbent held a large cumulative output advantage or when entrants built plants of sub‐optimal scale. Thus, a large incumbent lead in production experience did not deter new entry but did reduce the entrant'S probability of survival.