Innovation, competition, and industry structure

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Citation: Michael L. Tushman, Philip Anderson (1986) Innovation, competition, and industry structure. Administrative Science Quarterly (RSS)
Internet Archive Scholar (fulltext): Innovation, competition, and industry structure
Tagged: Business (RSS) Innovation (RSS)

Summary (Abstract)

Utterback and Suárez begin their article explicitly as a way of building on the innovation life cycle work from Utterback and Abernathy previously but expanding the argument beyond a description of just industry life-cycles to a discussion of how these life-cycles affect competition between firms. The paper starts broadly with the question: Why [do] some firms die while others survive? The article can also be seen as an answer to the population ecologists (e.g., Hannan and Freeman (1977)) who essentially had begun arguing that survival was a function of organizational density (i.e., "density dependence"). Utterback and Suarez argue that organization survival has much more to do with where in a life cycle an organization is.

Building on Utterback and Abernathy's concept of dominant designs, build a life-cycle view of coordination that basically includes the following steps:

  • Radical new innovation that essentially creates a new class of product;
  • Lots of follow on organizations and an increase in the number of organizations
  • The creation of a dominant design
  • An industry shakeout with a large decrease in the number of organizations through increased exit and which results in a small number of firms
  • The growth of these remaining firms in large and inflexible organizations through increased competence
  • A technological discontinuity that introduces competence destroying innovation and that starts the whole cycle over again.

In general, they expect to see the total number of organizations grow until the discontinuity, and then decrease afterwards. This is not necessary in contrast to the predictions of density dependency, but the authors argue that it provides a more qualitatively rich and accurate description of the processes or mechanisms than a simple answer of "density dependence." That said, it is a poor fit for the "specialist/generalist" theory in ecology.

Much of the rest of the article is a long series of examples from a variety of industries including the typewriter, the automobile, the television and television tubes, the transistor, the integrated circuit, the electronic calculator, and supercomputers. The model seems to apply very well except in integrated circuits where the authors argue that there is dominant design, and in supercomputers where it the industry is probably too young to tell. Each example consists largely of a more narrative description of how the industry had evolved over time and graphs showing entry, exit, and total number of organizations that, in almost all examples, showed very clear inflection points at the dominant design.

Theoretical and Practical Relevance

The article remains a core citation in the literature on industry dynamics and technological innovation and has been cited nearly 500 times.