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Escape from Equilibrium: Thinking Historically about Firm Responses to Competition

Published online by Cambridge University Press:  18 February 2015

Margaret C. Levenstein
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Abstract

Firms use a variety of strategies to limit competition that would otherwise erode profits. Firms innovate, creating new technologies, new markets, and new firms. Innovations allow them to distinguish their products or lower their costs and thus maintain profits. Their ability to innovate depends on the existence of social institutions that allow them to amass the resources—labor, capital, and information—necessary to compete successfully. Firms also maintain profits by manipulating the political process to maintain preferred access to markets, technology and resources. Finally, firms take actions to limit competition directly. Waves of consolidation, justified by an assumption of the inevitability of increasing firm size, have limited competition and entrepreneurship. Cartels and other forms of collusion, sometimes thought to have disappeared from US markets after the adoption of the Sherman Antitrust Act in 1890, are still active in a wide variety of national and international markets.

Type
Presidential Address
Information
Enterprise & Society , Volume 13 , Issue 4 , December 2012 , pp. 710 - 728
Copyright
Copyright © The Author(s) 2012. Published by Cambridge University Press on behalf of the Business History Conference. All rights reserved.

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