What is an 'Emerging Industry'

An emerging industry is a group of companies in a line of business formed around a new product or idea that is in the early stages of development. An emerging industry typically consists of just a few companies and is often centered around new technology.

BREAKING DOWN 'Emerging Industry'

It may take years for an emerging industry to reach profitability. Research and development expenses will comprise the bulk of early operating expenses of companies in the industry. Also, marketing expenses will be high because the product or service is largely unknown and unproven, so companies in an emerging industry must convince both investors and consumers that the product or service will be valuable. Investing in an emerging industry is a high risk-reward proposition.

Barriers to entry in an emerging industry can be relatively high because of the level of expertise required to compete in the new field. Ignoring such barriers and lured by visions of fabulous success. However, many entrants will rush into the space in an attempt to gain an early advantage. They will raise money (if they can), hire key personnel and secure the services of influential advisors. The vast majority of these entrants, though, will eventually discover that they do not have the skills or sufficient funds to bring a product or service to market, and at some point, they flame out.

Examples of an Emerging Industry

The world in the mid-1990s knew the internet as an emerging industry. Hundreds of companies formed to try to capitalize on the emerging industry and hundreds failed. Many survived, but we know only a handful of industry kings that lord over the realm today. Emerging industries in the current era — but perhaps viewed as the next evolution of the internet — are artificial intelligence, virtual reality and self-driving vehicles. Again, only a select few companies with the financial resources and intellectual property are thus far dominating the nascent fields. The biotechnology industry, however, is experiencing such breakthroughs in immunotherapy and gene therapy that it can be considered an emerging industry, or at the very least a sector with growth potential at an inflection point.

  1. Emerging Market ETF

    An exchange-traded fund that focuses on the stocks of emerging ...
  2. Emerging Market Economy

    A nation's economy that is progressing toward becoming advanced, ...
  3. Mature Industry

    An industry which has passed both the emerging and the growth ...
  4. Declining Industry

    An industry where growth is either negative or is not growing ...
  5. Emergency Banking Act Of 1933

    A bill passed during the administration of former U.S. President ...
  6. Canada's New Stock Exchange - CNQ

    An alternative stock exchange for micro-cap and emerging companies ...
Related Articles
  1. Personal Finance

    Most Americans Lack an Emergency Fund

    A recent study reveals that two-thirds of Americans can't come up with $1,000 for emergency expenses.
  2. Investing

    3 Risks Emerging Markets Debt Faces in 2016

    Learn about the major risks for emerging market debt in 2016. Discover how low interest rate policies by central banks fueled the growth of debt globally.
  3. Personal Finance

    How to Create Your Ideal Emergency Fund

    Life often gets in the way of perfectly planned out savings. Here are a few tips on how to establish an emergency fund.
  4. Investing

    Multi-Asset Investing: The Best Way Into Emerging Markets?

    What are the best ways to build exposure across emerging markets asset classes, including equities, fixed income and currencies?
  5. Investing

    Should You Invest In Emerging Markets?

    Emerging markets are risky, but the rewards they can create make them a worthy addition to any portfolio.
  6. Personal Finance

    Why You May Not Need an Emergency Fund

    Emergency funds are considered mandatory by most financial-planning experts, but they can be expensive to hold and ultimately unnecessary.
  7. Investing

    3 Emerging Markets Vanguard Funds

    Explore a detailed analysis of three Vanguard emerging markets mutual funds, and learn about the characteristics and suitability of these funds.
  8. Investing

    4 Emerging Markets Equity ETFs for Bull & Bear Markets (VWO, EEMV)

    Learn about how emerging markets stocks have fared in 2016 and four ETFs to consider for a bull and bear market in emerging markets.
  9. Investing

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  10. Investing

    An Introduction To Emerging Market Bonds

    The rewards associated with this fixed-income asset are significant, but so are the risks.
  1. Is Japan an emerging market economy?

    Discover whether Japan is an emerging market economy. Emerging markets have high levels of risk and reward due to their growth ... Read Answer >>
  2. What developed countries have the largest proportion of industrial companies?

    Examine the industrial sector in developed countries, and learn about the shift in manufacturing production to emerging market ... Read Answer >>
  3. How does investing in banks in emerging markets compare to developed countries?

    Explore the similarities and differences between investing in banks in emerging markets versus investing in banks in developed ... Read Answer >>
  4. What emerging markets are best positioned to benefit from growth in the Internet ...

    Explore which emerging markets are best positioned to benefit from the growth in the Internet sector. The sector continues ... Read Answer >>
  5. Why is investing in oil and gas in emerging markets riskier than investing in developed ...

    Discover some of the potential problems associated with oil and gas investments in emerging market countries that tend to ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center