Evolution of Industrial Innovation

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Evolution of Industrial Innovation
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Kondratieff Waves
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Evolution of Automobile Industry

• Craftsmanship Period
• Early inventions and innovations in auto industry
  were made in Germany and France.
• By 1905 hundreds of small firms were producing
  automobiles in U.S. and Europe, using craft
  techniques and general-purpose machine tools.
• In 1894, English MP Ellis went to French machine
  tool manufacturer, Panhard et Levassor, to
  commission a car.
• Since 1887, Panhard et Levassor had a license to
  manufacture Daimlers internal combustion engine
  and produced a few hundred crafted car per
  year.
• Ellis drove 56 miles to his country house in 5
  hrs 32 mins, at an average speed of 9.8 mph
  overspeeding (Speed limit for non-horsedrawn
  vehicles was 4 mph).

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Evolution of Automobile Industry

• Dominant Design of Engine -- Internal Combustion,
  Steam, or Electricity?
• In 1900, steam and electric vehicles accounted
  for about 3/4 of the 4000 automobiles in U.S.
• By 1917, 50,000 out of 3.5 million vehicles were
  steam and electric vehicles.

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Evolution of Automobile Industry
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Evolution of Automobile Industry

• One of the major reasons for luck-in to
  internal combustion engine was the success of
  Fords assembly line of mass production.
• Price of Model T and Electric cars
• Model T 850 in 1908 to 600 in 1913 and 360 in
  1916
• Electric Cars 2800 in 1913
• Personal mobility at low cost was the decisive
  advantage of the internal combustion engine to
  the customers.

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Evolution of the Internal Combustion Engine

• In 1680 Dutch physicist Christian Huygens, the
  first person to experiment with an internal
  combustion engine
• In 1859 French engineer J. J. Etienne Lenoir
  built a double-acting, spark-ignition engine that
  could be operated continuously.
• In 1873 George Brayton, an American engineer, had
  developed a two-stroke kerosene engine, but it
  was too large and too slow to be commercially
  successful.
• In 1888 Nikolaus A. Otto built a successful
  four-stroke engine, known as the Otto cycle.

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Evolution of the Internal Combustion Engine

• In 1888 the first successful two-stroke engine
  was completed by Sir Dougald Clerk, in a form
  which (simplified by Joseph Day in 1891) remains
  in use today.
• In 1885 Gottlieb Daimler constructed the
  prototype of the modern gas engine small and
  fast, with a vertical cylinder, it used gasoline
  injected through a carburetor.
• In 1889 Daimler introduced a four-stroke engine (
  mushroom-shaped valves, two cylinders, much
  higher power-to-weight ratio, no electric
  starting)
• All modern gasoline engines are descended from
  Daimler's engines.

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Craft Production v.s. Mass Production
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Evolution of Automobile Industry

• An oligopolistic structure of few firms emerges
• Fords immense success obliged other auto firms
  to introduce the assembly line, to become small
  niche producers or to go to the wall.
• Alfred Sloan combined a few companies to form
  General Motors.
• GMs strategies Greater range of models, more
  frequent model changes, and steady incremental
  improvements.

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Evolution of Automobile Industry

• Incremental innovations prevail in both product
  and process

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World Automobile Production
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Patterns of Industrial Innovation (Abernathy and
Utterback, 1978)

• An early radical product innovation leads to many
  new entrants and to several competing designs.
• Process innovations and scaling up of production
  then lead to the emergence of a dominant design,
  the erosion of profit margins, and a process of
  mergers and bankruptcies.
• An oligopolistic structure of few firms emerges.
• Incremental innovations prevail in both product
  and process.