Cyclical Industrial Dynamics

In many industries, market dynamics such as sales, price, capacity, and investment are highly cyclical, observed in the form of successive expansions and contractions that affect all firms. These industry-level cycles may have different patterns from the general business cycles at the country level; and they are also distinct from fluctuations due to seasonal effects and those due to random shocks in the industry. The generation of industry cycles is considered from the Schumpeterian perspective to be endogenous, while from the neoclassical perspective they are created by exogenous shocks. Different mechanisms may be seen to account for them, depending on the industry, ranging from effects of macro-business cycles, to mismatch and delay between different market dynamics, and to dynamics of innovations, among others. These cyclical industrial dynamics have profound implications for firms' strategizing.