Working Papers,
University of Aarhus, Aarhus School of Business, Department of Management

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.

Keywords: Technological development; Innovation; Schumpeter

23 pages, First version: January 1, 2000. Revised: November 1, 2003.

Note: Replaced by "Competition derived from Innovation as a Susbstitution Threat" wp 2003-2

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