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Structural Change And Innovation In U.S. Telecommunications

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  • P. M. Rao

Abstract

This paper reexamines broadly. from the standpoint of innovation, the arguments for vertical integration in the U.S. telecommunications industry in light of structural change since the breakup of the Bell System. While basic and applied research became the casualty of the 1984 breakup and the 1995 AT&T split, there is no evidence that the pace of innovative activity and productivity has slowed. Evidence from R&D and patent data suggests some acceleration of innovative activity. However. the service segment of the industry ceased to be the center of technological innovation. The source of future innovation seems to lie in the telecommunications and Internet equipment firms and independent software firms. The emergence of the competitive stand-alone software industry, combined with a trend towards open operating systems and customer demand for greater flexibility, and growing substitution of technology alliances for in-house R&D appear to have undermined the case for vertical integration in the telecommunications industry. From the standpoint of business strategy, the question of whether a firm like AT&T, notwithstanding its huge investments in cable facilities, can develop distinctive and sustainable capabilities through horizontal expansion and ubiquity and one-stopshopping marketing alone remains open.

Suggested Citation

  • P. M. Rao, 2001. "Structural Change And Innovation In U.S. Telecommunications," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 10(2-3), pages 169-198.
    • Handle: RePEc:taf:ecinnt:v:10:y:2001:i:2-3:p:169-198
    DOI: 10.1080/10438590100000008
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    References listed on IDEAS

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    1. M. Ishaq Nadiri & Banani Nandi, 1996. "The Changing Structure of Cost and Demand for the U.S. Telecommunications Industry," NBER Working Papers 5820, National Bureau of Economic Research, Inc.
    2. Nadiri, M.I. & Nandi, B., 1996. "The Changing Structure of Cost and Demand for the U.S. Telecommunications Industry," Working Papers 96-40, C.V. Starr Center for Applied Economics, New York University.
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    Cited by:

    1. Andrea Bonaccorsi & Massimo Colombo & Massimiliano Guerini & Cristina Rossi-Lamastra, 2013. "University specialization and new firm creation across industries," Small Business Economics, Springer, vol. 41(4), pages 837-863, December.

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      Keywords

      Telecommunications; R&D; Software; AT&T; JEL Classification L96;
      All these keywords.

      JEL classification:

      • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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