1 Creative Destruction or Organizational Ineptitude: Explaining the Decline in the US Machine Tool Industry

valuable research assistance. 2 An interesting, and perhaps exasperating, issue about industrial dynamics is the question of why previously “vibrant ” industries tend to decline over time. From textiles to semiconductors and consumer electronics, analysts have wondered why the United States has lost competitiveness in these previously vital industries. The latest “casualty ” is the U.S. machine tool industry, where performance has been deteriorating inexorably. This paper explores the extent to which two competing paradigms – Creative Destruction and Organizational Ineptitude – explain the decline in the U.S. machine tool industry. The paper contends that, given the incremental and non-discrete nature of technical change in the machine tool industry, creative destruction has not been a problematic phenomenon in the industry in the U.S. Firms in the industry have effectively adopted and assimilated new digital-based production technologies, leaving organizational ineptitude as a plausible explanation for the industry’s decline. Based on a sample of over 60 firms i