70 R. R. Nelson of the same design and development activities as own right. For an economist what matters is that did the innovator, and to implement similar pharmaceutical R&d take advantage of the new production and other supporting activities. Thus possibilities opened by new biotechnology, and firms with similar strategies and core capabilities not whether the old pharmaceutical firms do it are in a much better position to imitate or learn or whether they fail, so long as new ones take and build from each others work than firms with up the torch different strategies and capabilities However, the fact that the leading edge Thus to an extent the market is selecting companies in a field often change is a fascinating on strategies and companies, as well as new matter. It is consistent with the theory of focused technologies. This suggests that in some circum- and constrained core capabilities presented above stances strategic diversity may get extinguished. And it is a central reason why, for an economist There is something to this argument. A number interested in technological advance, firm differ of analysts, some working in the tradition of ences matter importantly economic research, some in a business schoo research tradition, have suggested that there is a natural industry life cycle. When an industry or a broad technology is new, a wide variety THE EVOLUTION OF FIRM of approaches to technological innovation- ORGANIZATION strategies-is taken by different firms. As experi ence grows, certain of the approaches begin to There has been far more study of the way look significantly better than others. Firms who technology advances than there has been of the have made the right bets do well. Those who way firm organization changes, By organization have not, need to switch over, or drop out. a I mean what I think Chandler(1966)means by number of studies have shown that, as an industry strategy and structure, those aspects of a firm or technology matures, there is a significant that are wider and more durable than the reduction in the number of firms, and in some particular technologies and other routines it cases the emergence of adominant designwith employs at any moment, or even its extent core all surviving firms producing some variety of that capabilities, and which in effect guide the internal tuned to the niche they have found evolution of these. It is apparent that change in One fascinating question is what happens in a organization in this broad sense, as well as relatively mature industry when a new and advance in technology, has been an essentia potentially superior technology comes into exist- feature of the enormous economic progress that ence. The evidence suggests that it matters has been experienced over the last century and whether the new technology is conformable with a half the core capabilities of extant firms, or requires Some writers clearly would like to give very different kinds of capabilities. Tushman organizational change separate and equal billing and Anderson (1986)call these two kinds with technical advance as a source of economic of developments competence enhancing and progress. I would like to argue here, however, competence destroying, Under the latter circum- that one needs to understand organizational stances, new firms are likely to be the innovators, change as usually a handmaiden to technological and old firms often are unable to respond advance, and not a se eparate force behind effectively. Tushman and Anderson note that a economic progres change in management, and presumably a major If I understand him correctly, this would be change in strategy, often is necessary if the old Chandler's position. The new technology of the firm is to le new environment. But railroads required, for its effective implemen capabilities are far more difficult to change than bilities far beyond that possessed by tradita. it may not be sufficient. Structure and core tation, the development of organizational ca anagement and articulated strategies owner managed firms. Line and staff organiz For a student of business management the ational form, along with the development of the question of what enables a firm to change position of hired manager, enabled the railroads directions effectivel be a viable competitor to be effectively 'governed,, to use williamsons in the new regime, is of central interest in its term. Later, new technologies which promised