The diffusion of the innovation spreads its benefit throughout the economic system, and we all see economic welfare rise with no additional effort within the productive system. It suggests that market power and limited competition might be good for growth. The presence of fewer firms limits the spillover of proprietary knowledge through gossip or employees' moving from company to company. Harvard business professor Michael Porter has popularized a different view in recent years. Porter argues the key to growth is the pressure to innovate, as any firm that fails to respond quickly to innovations in the market simply won't survive.
Competitors soon follow any new technological lead and eliminate excess profits and market power.
City growth results from constant competition among small local firms. An alternative source of growth in these competitive clusters is technological change that works against traditional assembly line methods of production. As production moves toward nonstandard output, we see the development of many small and competitive subcontractors in a production system that becomes vertically disintegrated. Hollywood and the film industry provide an example, as assembly line sound stages gave way 50 years ago to shooting movies on location around the world. Despite closing its soundstages, Hollywood has remained the heart of the movie business.