Technological Discontinuties, Organizational Capabilities, and Strategic Commitments

Abstract

Innovations based on radically new technologies are believed to create advantages for entrants over incumbents in the relevant markets. Under what circumstances is this true? To what extent do incumbents' disadvantages stem from their failure to make timely commitments to new capabilities and new strategies as opposed to their inability to implement those commitments effectively? We explore those questions in relation to recent literature in economics and organization theory and introduce the concept of the ‘value network’. Historical evidence suggests that entrants find greatest advantage when innovations disrupt established trajectories of technological progress, a circumstance associated with moves to new value networks. The incumbent's disadvantage, hence, seems to be associated with an inability to change strategies, not technologies.