Disruptive Technologies and the Emergence of Competition

INSEAD Working Paper No. 2001/103/SM

50 Pages Posted: 13 Dec 2001

See all articles by Ron Adner

Ron Adner

Dartmouth College - Strategy & Management Area; Dartmouth College - Tuck School of Business

Peter B. Zemsky

INSEAD - Strategy; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2, 2003

Abstract

We formalize the phenomenon of disruptive technologies that initially serve isolated market niches and, as they mature, expand to displace established technologies from mainstream segments. Using a model of horizontal and vertical differentiation with discrete customer segmentation, we show how the threat of disruption depends on such factors as the rate of technological advance, the number of firms using each technology, and the ability of firms to price discriminate. We characterize the effect of disruption on prices, market shares, social welfare and innovation incentives. We show that the potential for mergers to alter the boundaries of competition has important implications for evaluating their impact on social welfare and firm profits.

Keywords: Disruptive technologies, market definition, technology convergence, product differentiation

JEL Classification: L1, L4, O3

Suggested Citation

Adner, Ron and Zemsky, Peter B., Disruptive Technologies and the Emergence of Competition (July 2, 2003). INSEAD Working Paper No. 2001/103/SM, Available at SSRN: https://ssrn.com/abstract=293686 or http://dx.doi.org/10.2139/ssrn.293686

Ron Adner

Dartmouth College - Strategy & Management Area ( email )

Hanover, NH
United States

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Peter B. Zemsky (Contact Author)

INSEAD - Strategy ( email )

Boulevard de Constance
77305 Fontainebleau
France
+33 1 60 72 4162 (Phone)
+31 1 60 74 5500 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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