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A Value Chain Perspective on the Economic Drivers of Competition in the Wireless Telecommunications Industry

By

Scott C. Constance

B.A. Economics and Mathematical Methods in the Social Sciences

Northwestern University, 1996

and

Jeffrey R. Gower

B.S. Civil and Environmental Engineering

Union College, 1992

Submitted to the Alfred P. Sloan School of Management in

Partial Fulfillment of the Requirements for the Degree of

Master in Business Administration

at the

Massachusetts Institute of Technology

June 2001

© 2001 Massachusetts Institute of Technology

All Rights Reserved

Signatures of

Authors……………………………………………………………………………………………………

Alfred P. Sloan School of Management

May 11, 2001

Certified by…………………………………………………………………………………………………………………….

Charles H. Fine

Chrysler Leaders for Manufacturing Professor of Management

Thesis Supervisor

Accepted by…………………………………..………………………………………………………………………………

Margaret C. Andrews

Executive Director, Master in Business Administration Program

A Value Chain Perspective on the Economic Drivers of Competition in the Wireless Telecommunications Industry

By

Jeffrey R. Gower

and

Scott C. Constance

Submitted to the Alfred P. Sloan School of Management on

May 11, 2001 in Partial Fulfillment of the Requirements for the

Degree of Master in Business Administration

Abstract

We address aspects of uncertainty brought about by the rapid pace of change in the wireless telecommunications industry. We draw upon elements of value chain theory in developing a systematic historical perspective on these changes in wireless telecommunications. We draw upon elements of classical economic theory in understanding the dynamics driving these changes.

A System Dynamics model is constructed to bridge the theoretical and empirical gap between value chain theory and classical economics. We use this model to understand the dynamics of possible future changes in the wireless...