The Determinants of the Long-Run Survival and Early-Exits in a High-Tech Industry

A paradoxical phenomenon is that technically superior firms frequently experience early-exits regardless of industry differences. We attempt to tackle if the paradoxical phenomenon is still applicable to a disk drive industry that is considered ad one of high-tech industries. For this purpose, we divide into two different groups within the disk drive industry. A full-time survivor group includes those firms that have survived during an entire sample period and an early-exit group includes those firms that have experienced early exits within the first three years since their initial take-offs. We attempt parametric survival estimations as well as probit estimations along with a regression analysis. According to main results, the absolute technological superiority measured by the firm-specific capability to develop the smallest drive in each year affects negatively to the full-time survivor group’s likelihood to survive while the relative technological superiority measured by areal density affects positively. In contrast, the early-exit group’s likelihood to survive does not increase even if the relative technological superiority becomes enhanced. Interestingly, the economies of scope turns out be as important as the relative technological superiority, which implies that superior technology combined with the economies of scope can extend longevity in the competitive disk drive industry. It is evident that firms can develop the newest innovation as stronger their relative technological superiorities are; however, it turns out that there are no lagged effects between them.