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PurposeThe purpose of this paper is to argue that the kind of variety among firms that is a condition for economic progress is fundamentally based on the intellectual capital (IC) of each firm.Design/methodology/approachThe theoretical analysis is illustrated with case study findings from the Finnish games industry.FindingsThe firm heterogeneity essential for the development of a knowledge‐intensive industry cannot be accurately captured with the concepts "routines" or "dynamic capabilities". Instead, IC should be adopted for this purpose as it emphasises the skills, actions and determination of people and their interactions, thus capturing the uniqueness of each firm.Research limitations/implicationsCase study findings from other knowledge‐intensive industries would be needed to make the argument more general.Originality/valuePapers approaching IC from the industry‐level have been scarce, likewise papers tying IC to the evolutionary theory of economic change.

Research summary We explore the qualitative differences in entries and exits over time. Using qualitative and quantitative data on 96 firms over 200 years, we study industry evolution from the perspective of individual decision‐making situations. Our historical and statistical analyses reveal the vital role of technology investments in determining firm outcomes, and the technological, institutional and governance dynamics that lead firms to invest or to abstain. Our main theoretical and methodological contribution concerns the importance of the multiplicity of firm‐level rationalities and decisions as fundamentals in theorizing on industry evolution. Managerial summary What determines firm outcomes in terms of acquisition, dissolution and survival? This paper answers this crucial question of strategy and elaborates on the extent to which the outcome is under top management control. Our findings highlight the importance of technology investments and we identify factors that make such investments possible and profitable. Our results emphasize that firms weighing options must assess the economic meaningfulness of generational technology investments which result in narrowing profit margins and intensifying competition. Another insight concerns the management of political risks. Long‐term fluctuations in regulation and foreign trade policy make it hazardous to optimize to the contemporary political regime. Skillful strategists invest in geographical and technological complexity, which in combination increase the chances of survival in rapidly changing political regimes. ; peerReviewed

We analyze historical and longitudinal research focusing on industry decline. Our analysis suggests that the literature's general reliance on a few meta-theoretical arguments has important consequences for how decline is framed and explained. We identify four meta-theoretical clusters in the literature: politics and market dynamics are seen as exogenous factors with deterministic features, whereas technology and management capabilities are framed as firm-internal failures with causally questionable explanations of how firm-level characteristics explain industry-level decline. We propose that it is important to understand the limitations of distinct meta-theoretical arguments for an enhanced theoretical and methodological understanding of what industry decline is, how it takes place, and why. Accordingly, this study contributes to business history research by restructuring and clarifying latent theoretical issues, demonstrating the pros and cons of researchers' choices, and offering guidelines and propositions for researchers interested in industry decline. ; peerReviewed