Shakeout

Shakeout and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Shakeout: A condition that may occur as a result of innovation or technological change in a competitive industry. Because the introduction of new processes or techniques will improve productivity, more overall industry output becomes possible, driving down the price level. However, only firms employing the new technology can sell at the lower prices without incurring losses; others are “shaken out.” Eventually, a new equilibrium for the industry will be reached, but –because of the greater efficiency of the new technology –the number of firms remaining in the industry is likely to be smaller. In the “, case of an industry shakeout on an international scale, governments are likely to take measures to ensure that “their” firms are among the survivors (see national champions).