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Critical Fixities Under Continuous Technological Change

Critical Fixities Under Continuous Technological Change

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Excerpt from Critical Fixities Under Continuous Technological Change: Some Strategic Implications

One of the most significant industrial transformations in the last twenty years in the U.S. is the decline of the smokestack industries such as the automobile and steel industries. The major reason for this decline is the inability of these industries to compete with their international rivals. High labor costs and obsolete equipment have been cited as the main causes in this loss of international competitiveness.

Although high labor costs should have induced firms to replace less efficient equipment with new labor-saving technologies, which have been universally available in these industries, it seems strange, especially at first glance, that steelmakers and automakers suffering from high labor costs have not aggressively adopted these labor-saving innovations. One possible explanation for this seemingly contradictory phenomenon, as argued below, is the existence of critical fixities, a multidimensional inertia that keeps a firm from responding to change. More specifically, this paper illustrates that, high labor costs notwithstanding, critical fixities could have contributed to the slow adoption of new technologies and thus caused the decline of the steel industry.

This paper is divided into three sections. The first section examines and explains the theoretical foundations of critical fixities; the second section deals with their strategic implications; and the third section discusses the steel industry as an example of the application of critical fixities.

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