Rock 'n Roller Coaster: An Explorative Study on the Evolution of the European Steel Roller Coaster Industr

Over the past decades, empirical evidence has been collected on the evolution of industries. Most of these studies follow the traditional three-stage model inspired by Utterback and Abernathy’s (1975) product life cycle. These stages are: (i) the initial growth stage during which the number of firms in the industry increases; (ii) the period of shakeout where the number of firms decreases; and finally, (iii) the stage of stability or maturity, during which the number of firms does not change substantially. Be that as it may, this model has several strong assumptions and, consequently, there are just as many industries that deviate from this “general” pattern (Nelson, 1994; Malerba and Orsenigo, 1996; Klepper, 1997). Several reasons have been articulated on why this is the case, many of which can be linked to the organizational characteristics of Hobday’s (1998) complex product structure (CoPS) industries. Yet, the determinants of these alternative evolutionary paths are only recently receiving more attention (Klepper and Thompson 2007).
In investigating the evolution of an industry there is the interest to identify entry and exit. The interest in entry has lead to a typology of entry, mainly in relation to pre-entry experience of the founders. Helfat and Lieberman (2002) present a typology of firm entry, distinguishing between diversified entry, spin-off entry, and inexperienced start-ups. The dominant form of entry differs between industries where the evolution of some industries can be explained by spin-off dynamics (see Klepper (2009) for an overview) while others are characterized by diversified entry, e.g. the television receiver industry (Klepper and Simons, 2000).
The issue of exit has not received that detailed attention. Certainly, there are studies that have made a distinction between different types of exit, e.g. firm closure, merger and acquisition, firms leaving the industry, and firms that move abroad (Carroll and Hannan, 2000). However, it is surprising that hardly any of the long list of industry studies focus on the post exit knowledge diffusion, especially since the knowledge is considered the main driving force of the life cycle pattern (Cantner et al. 2009). In addition, this knowledge diffusion and the ability of the industry to absorb the knowledge of exiting firms can be regarded as an important indicator of the resilience of this industry.
This paper applies the above-mentioned perspectives on an explorative but detailed case study on the evolution of the European steel roller coaster industry. We selected this industry because it has many of the features of a CoPS industry. To investigate the evolution of this industry we rely on a unique dataset that pools data from a wide variety of sources but which has its point of departure in large census-like database on roller coasters, the Roller Coaster Database (RCDB). In addition to detailed information on almost any roller coaster produced since the early 20th century, this database also provides information on all the firms that are, or have been, active in the roller coaster industry. To identify background information on these firms and its founders, we use various sources of online and offline media, e.g. books, roller coaster magazines, information on trade fairs, websites of roller coaster interest organization and fanatics, and industry experts. This information enables us to provide a rather detailed case study description on evolution of this industry.
As a part of our analysis, we created a so-called genealogical tree of all firms. This tree provides us with an overview of when the firms entered the industry, the pre-entry experience of their founders, and the linkages between firms based on post-exit knowledge flows. In addition, we provide a graph indicating the entry and exit of firms in the industry, making a distinction between the number of entries, the number of exits, the total number of spin-offs, the total number of diversifiers, and the total population of firms in the period 1950-2011. Based on these figures, it appears that diversified entry plays an important role in the evolution of the industry. However, the pre-entry experience of the industry can be divided in two categories, i.e. pre-entry experience in the same market and pre-entry experience in technological related fields. We find that these two categories of firms produce rather distinct type of products. This is also reflected by differences in patent behavior of the type of entrants. The technological related diversifiers produce the more advanced roller coasters; it is also in these firms where the major innovations occur and there is a clear regional divide on where the type of roller coaster is produced. The market-related diversifiers, in contras, offer simpler designs and do not contribute as many innovations. While such a situation may lead to a shakeout, we do not actually observe one. We expect that the prevention of a shakeout is due to the lust for diversity in this industry, i.e. people (and thus also amusement parks demand a wide variety of thrills. Finally, we find that in the market we studied, both the tangible and intangible assets of firms that exit the industry are almost fully absorbed by the remaining firms in the industry.