Decoding Market Disruption: New Schema, Model, and Findings

50 Pages Posted: 14 Jun 2010

See all articles by Ashish Sood

Ashish Sood

University of California Riverside

Gerard J. Tellis

University of Southern California - Marshall School of Business, Department of Marketing

Date Written: June 14, 2010

Abstract

The failure of firms in the face of technological change has been a topic of intense research and debate, spawning the theory (among others) of disruptive technologies. However, the theory suffers from circular definitions, inadequate empirical evidence, and lack of a predictive model. The authors develop a new schema to address these limitations. The schema generates seven hypotheses and a testable model relating to platform technologies. The authors test this model and hypotheses with data on 36 technologies from 7 markets. Contrary to extant theory, technologies that adopt a lower attack (‚Äúpotentially disruptive technologies‚ÄĚ) 1) are introduced as frequently by incumbents as by entrants, 2) are not cheaper than older technologies, and 3) rarely disrupt firms, and 4) both entrants and lower attacks significantly reduce the hazard of disruption. Moreover, technology disruption is not permanent due to multiple crossings in technology performance and numerous rival technologies co-existing without one disrupting the other. The proposed predictive model of disruption shows good out-of-sample predictive accuracy. The authors discuss the implications of these findings.

Keywords: Technology Disruption, Firm Disruption, Demand Disruption, Correlated Hazards, Prediction of Disruption

JEL Classification: M3, O3, C3

Suggested Citation

Sood, Ashish and Tellis, Gerard J., Decoding Market Disruption: New Schema, Model, and Findings (June 14, 2010). Emory Law and Economics Research Paper No. 10-68, Available at SSRN: https://ssrn.com/abstract=1624768 or http://dx.doi.org/10.2139/ssrn.1624768

Ashish Sood (Contact Author)

University of California Riverside ( email )

United States
6782059931 (Phone)

HOME PAGE: http://www.ashishsood.net

Gerard J. Tellis

University of Southern California - Marshall School of Business, Department of Marketing ( email )

Hoffman Hall 701
Los Angeles, CA 90089-0443
United States
213-740-5031 (Phone)
213-740-7828 (Fax)

HOME PAGE: http://gtellis.net

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