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Technological competition, creative destruction and the competitive process

Author

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  • Howells, John

    (Department of Organisation and Management, Aarhus School of Business)

Abstract

This paper takes a simple definition of competition as a threat to established revenues. It then develops this idea as it applies to technological change through a series of illustrative examples. "Technological competition" occurs only when one technology substitutes for another, for a given market. When innovation generates new uses - new markets - it does not result in technological competition. Schumpeter's "creative destruction" is based on extreme examples of the substitution process, where substitution progresses until the established technology is largely destroyed for a given market. It is shown that established technologies are not necessarily completely destroyed and that they may survive in niche markets or a market distinct from that threatened. Through a review of cases it is argued that the degree to which innovation is "radical" has an influence on the scale of threat imposed on established forms and so also influences their possible reactions to the threat. The competition experienced between the innovating firms is considered as a distinct "competitive scenario" to that between innovators and establised firms. In some cases innovating firms may perceive a greater potential threat from technologically similar rivals than from established firms. It is argued that there is no reason to move from Schumpeter's position on the role of competition in providing the incentive to innovate; it remains a negative one, where innovation promises an escape from overcrowded markets.

Suggested Citation

  • Howells, John, 2000. "Technological competition, creative destruction and the competitive process," Working Papers 2000-4, University of Aarhus, Aarhus School of Business, Department of Management, revised 01 Nov 2003.
    • Handle: RePEc:hhb:aardom:2000_004
    Note: Replaced by "Competition derived from Innovation as a Susbstitution Threat" wp 2003-2
    as

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    References listed on IDEAS

    as
    1. Strassmann, W. Paul, 1959. "Creative Destruction and Partial Obsolescence in American Economic Development," The Journal of Economic History, Cambridge University Press, vol. 19(3), pages 335-349, September.
    2. Howells, John, 2000. "The response of old technology incumbents to technological competition - Does the sailing ship effect exist?," Working Papers 2000-1, University of Aarhus, Aarhus School of Business, Department of Management.
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    Cited by:

    1. Derya Güler Aydin & Bahar Araz Takay, 2012. "The Role Of Competition In The Techno-Economic Paradigm On The Market," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 57(193), pages 137-150, April- Ju.

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