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Escape from Equilibrium: Thinking Historically about Firm Responses to Competition

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  • Levenstein, Margaret C.

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.

Suggested Citation

  • Levenstein, Margaret C., 2012. "Escape from Equilibrium: Thinking Historically about Firm Responses to Competition," Enterprise & Society, Cambridge University Press, vol. 13(4), pages 710-728, December.
  • Handle: RePEc:cup:entsoc:v:13:y:2012:i:04:p:710-728_01
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    Cited by:

    1. Lamoreaux, N., 2019. "The Problem of Bigness: From Standard Oil to Google," Cambridge Working Papers in Economics 1963, Faculty of Economics, University of Cambridge.
    2. Miguel Á. López-Morell & José M. O'kean, 2014. "Rothschilds' strategies in international non-ferrous metals markets, 1830–1940," Economic History Review, Economic History Society, vol. 67(3), pages 720-749, August.
    3. Hannah, Leslie, 2015. "A global corporate census: publicly traded and close companies in 1910," LSE Research Online Documents on Economics 59414, London School of Economics and Political Science, LSE Library.
    4. Leslie Hannah, 2015. "A global corporate census: publicly traded and close companies in 1910," Economic History Review, Economic History Society, vol. 68(2), pages 548-573, May.

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