The Dynamics of Learning and Competition in Schumpeterian Environments
Forthcoming at Organization Science
59 Pages Posted: 3 Jun 2019
Date Written: May 11, 2019
In this study, we examine the nature of Schumpeterian competition between entrants and incumbents. We argue that incumbents may respond to the threat of entry by either attacking the entrant or trying to learn from it, and that entrants, in turn, may react by either reciprocating the incumbent’s advances or retreating from it. Putting these competitive choices together, we develop a framework of four distinct potential scenarios of Schumpeterian competition. In particular, we emphasize a scenario we term creative divergence, wherein incumbents try to learn from entrants and build on their technologies, but their investments to do so cause entrants to retreat, resulting in diminishing returns to learning investments by incumbents. Exploratory analyses of the US cardiovascular medical device industry find patterns consistent with the creative divergence scenario, with incumbent knowledge investments helping them to learn from entrants, but these learning benefits being undermined as entrants move away from incumbents.
Keywords: competitive dynamics, evolutionary theory, absorptive capacity, Schumpeterian environments, creative divergence, knowledge spillovers
JEL Classification: D4, L1, M1, M13
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