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Industry Lifecycle
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The lifecycle passes through 5 distinct stages:
  • I - dormant stage with low numbers of competitors enjoying high monopoly profits

  • II - "takeoff" stage with soaring entry and virtually non-existent exit from the market

  • III - high turnover stage with many firms entering the market and leaving it

  • IV - "shakeout" stage with mass exit via mergers, bankruptcies, etc.

  • V - stabilization stage during which a stable oligopoly emerges


Industry lifecycle is commonly correlated with the cycle of product and process innovation. Other factors that may launch industry lifecycle include:
  • government intervention (e.g., Deregulation ),

  • liberalization of external trade,

  • lower transportation costs.



REFERENCES

  • Michael Gort, Steven Klepper. ''Time paths in the diffusion of product innovations''. Economic Journal, vol.92, no.367. (September, 1982) Pp.630-653.