Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 239: A new perspective on the innovator’s dilemma

Henrik Berglund () and Christian Sandström ()
Additional contact information
Henrik Berglund: Chalmers University of Technology, Postal: Chalmers University of Technology, 412 96 Göteborg,Sweden
Christian Sandström: The Rato institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: Abstract: Why do entrant firms sometimes gain the upper hand under conditions of discontinuous technological change? Previous research on this topic has either looked at the role of established competencies and/or firm incentives to invest in a new technology. In this paper we explore an alternative explanation. Drawing upon evidence from the ongoing transition from CCTV to digital, IP based video surveillance, we argue that entrant firms may be more prone to act entrepreneurially, i.e. more inclined to proactively create or transform markets and build ecosystems. As new technologies frequently require altered behaviour among customers and stakeholders, this capability is sometimes critical in order to succeed in a technological transition. Our contribution therefore lies in pointing out that not only may incentives to allocate R&D resources differ among entrants and incumbents, firms might also have different incentives to engage in entrepreneurial activities of creating or transforming markets.

Keywords: Disruptive Innovation; Entrepreneurship; Incentives; Technological Discontinuities; business model; ecosystem.

JEL-codes: O14

16 pages, December 31, 2014

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