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Disruptive Technologies and the Emergence of Competition

Author

Listed:
  • Ron Adner

    (INSEAD)

  • Peter Zemsky

    (INSEAD)

Abstract

We formalize the phenomenon of disruptive technologies that initially serve isolated market niches and, as they mature, alter industry boundaries by displacing established technologies from mainstream segments. Using a model of horizontal and vertical differentiation, we show how the threat of disruption depends on rates of technological advance, how many firms use each technology, relative market segment sizes, and firms' ability to price discriminate. We characterize the effect of disruption on prices, market shares, social welfare, and innovation incentives. We show that the possibility that mergers trigger disruption and thereby alter industry boundaries is important for assessing their impact on social welfare and profits.

Suggested Citation

  • Ron Adner & Peter Zemsky, 2005. "Disruptive Technologies and the Emergence of Competition," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 229-254, Summer.
  • Handle: RePEc:rje:randje:v:36:y:2005:2:p:229-254
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    More about this item

    Keywords

    Market Structure; Firm Strategy; and Market Performance: General Antitrust Policy: General Business Economics: General - market definition; mergers; threat of substitutes;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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