Technology Adoption and Product Diversification in the Brewing Industry over the Nineteenth and Twentieth Centuries

This dissertation studies the effect of scientific discoveries, regulation, and changes in market access on the American and Japanese brewing industries over the nineteenth and twentieth centuries. Breweries adapted to these shocks by switching to new technologies, products, and geographical markets. In the long run, this adaptation process shaped the structure of the brewing industry and introduced competition and new production techniques in the soft-drink and biotechnology industries. Using detailed data at the brewery-level, coupled with natural experiments, I study the repercussions of this adaptation mechanism across industries and over time.In the first chapter, I study how private trade costs affect the relocation of industries in response to market integration. I focus on the relocation of the American brewing industry during the late nineteenth century, when migration and the expansion of the American railroad network reduced the costs of reaching consumers troughout the US. Using a brewery-level database that I constructed, I show that the endogenous adoption of bottling --a private reduction in marginal trade costs that required the payment of a one-time cost-- amplified the effect of market integration on the relocation of the brewing industry from the East Coast to the Midwest of the United States.In the second chapter, I study whether early exposure to demand reductions improves the performance of firms during future demand shocks. I focus on the American brewing industry during prohibition in the early twentieth century. Some breweries faced early reductions in demand when nearby counties introduced prohibition at the local level. Other breweries were insulated from local prohibitions until the start of federal prohibition, when the entire US prohibited the production and distribution of alcoholic drinks. I follow 1,300 breweries throughout both local and federal prohibitions, using firm-level data that I collected. Breweries that faced early reductions in demand were 12\% more likely to survive the full prohibition period, from before local prohibition until the end of federal prohibition, than breweries that did not face early reductions in demand. This increase in survival occurred because a group of breweries made early investments in machinery that later facilitated product switching into soda and other foodstuffs.The third chapter is coauthored with Michael Darby and Lynne Zucker. Scientists affiliated to Japanese breweries authored 81\% of the academic articles produced by breweries all over the world between 2000 and 2005 --50 percentage points more than twenty years earlier. Most of this increase in academic production occurred between 1986 and 1996, when the number of published articles affiliated to Japanese breweries increased sixfold. We show that this increase in academic production is the result of product diversification towards the pharmaceutical and biochemical sectors in which collaboration with academic scientists is common. Product diversification was possibly driven by reductions of barriers to entry in the Japanese market for beer. Diversification and innovation became persistent over time because the new sectors were intensive in knowledge that was tacit and therefore excludable.