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Disruptive Technologies and the Emergence of Competition

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Author Info

  • Ron Adner

    ()
    (INSEAD)

  • Peter Zemsky

    ()
    (INSEAD)

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    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.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 36 (2005)
    Issue (Month): 2 (Summer)
    Pages: 229-254

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    Handle: RePEc:rje:randje:v:36:y:2005:2:p:229-254

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    Related research

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

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    Cited by:
    1. Matt Marx & Joshua S. Gans & David H. Hsu, 2013. "Dynamic Commercialization Strategies for Disruptive Technologies: Evidence from the Speech Recognition Industry," NBER Working Papers 19764, National Bureau of Economic Research, Inc.
    2. Pascal Le Masson & Armand Hatchuel & BenoƮt Weil, 2010. "Modeling Novelty-Driven Industrial Dynamics with Design Functions: understanding the role of learning from the unknown," Post-Print hal-00696970, HAL.
    3. Daron Acemoglu & Ufuk Akcigit & Murat Alp Celik, 2014. "Young, Restless and Creative: Openness to Disruption and Creative Innovations," PIER Working Paper Archive 14-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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