Content area
Full Text
We suggest that the type of complementary assets (generic versus specialized) needed to commercialize a new technology is critical in determining the industry- and firm-level performance implications of a competence-destroying technological discontinuity. At the industry level, we hypothesize that incumbent industry performance declines if the new technology can be commercialized through generic complementary assets, whereas incumbent industry performance improves if the new technology can be commercialized through specialized complementary assets. At the firm level, we posit that an incumbent firm's financial strength has a stronger positive impact on firm performance in the postdiscontinuity time period if the new technology can be commercialized through generic complementary assets. We hypothesize, however, that an incumbent firm's R&D capability has a stronger positive impact on firm performance in the postdiscontinuity time period if the new technology can be commercialized through specialized complementary assets. Drawing on multi-industry, time series, and panel data over a 26-year period to analyze pre- and postdiscontinuity industry and firm performance, we find broad support for our theoretical model.
Key words: technological discontinuities; complementary assets; incumbent industry and firm performance heterogeneity; time series and panel data analyses
In one of the most influential works in economics during the twentieth century, Joseph Schumpeter (1942) posited that "the process of Creative Destruction is the essential fact about capitalism...it is not [price] competition which counts but the competition from...new technology...competition which strikes not at the margins of profits of existing firms but at their foundations and their very lives" (pp. 83-84). Schumpeter argued that new technologies create new market opportunities while simultaneously damaging or destroying demand in many existing markets. Moreover, incumbent firms often experience great difficulty adapting to the changes brought about by a new technology. When confronted with a technological discontinuity, incumbent firms often succumb to internal inertia and suffer years of severe financial dislocation, or even go out of business (Foster 1986).
Prior empirical research has generated important insights and advanced our understanding of the dynamics of technological change (Christensen 1997, Tripsas 1997, Tushman and Anderson 1986), yet this research has focused primarily on incumbent firms as a group, neglecting to inquire into firm-level heterogeneity. Appreciating firm-level heterogeneity is necessary to more fully understand firm competitive advantage (Barney 1991), especially in highly dynamic environments (Teece...