A Duration Approach to High-Tech Industry: An Evidence from the Rigid Hard Disk Drive Industry

This paper analyzes an everlasting paradoxical phenomenon why technically superior firms tend to exit earlier. We tackle this issue using probit analysis as well as survival analysis. We mainly focus on four variables: absolute technology superiority, relative technology superiority, portfolio capability, and marketing ability. The absolute technological superiority is measured by the smallest drive production ability and the relative technological advantage represents the degree of superior storage capacity a firm owns against rival firms. The portfolio capability is measured by the number of disk drive inches produced annually and so it is a proxy for the economies of scope and the number of model out of each disk drive category is a proxy for marketing ability. Estimation results suggest that the absolute technological superiority affects negatively on firm longevity whilst the relative technological advantage, measured by normalized technology position index, affects positively. Further, portfolio capability rather than relative technological superiority turn out to be more important to firm survival, which implies that superior technology cannot guarantee long-run survival alone, quite differently from a conventional wisdom.