Strategies for survival in fast-changing industries

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Citation: Clayton M. Christensen, Fernando F. Suárez, James M. Utterback (1998) Strategies for survival in fast-changing industries. Management Science (RSS)
Internet Archive Scholar (fulltext): Strategies for survival in fast-changing industries
Tagged: Business (RSS) Strategy (RSS), Innovation (RSS)

Summary (Abstract)

This article builds on the work on industry dynamics and life-cycles (Utterback and Abernathy) and, in particular, in the issue of firm survival which was of growing importance in the literature on industry dynamics and innovation (e.g., Utterback and Suarez (1993); Klepper and Simons (1997) (not cited)). The article attempts to show empirically that, "variables related to managerial choice, rather than factors in the outside environment that are beyond the control of the managers, were the primary factors driving firm survival." Like much of Christensen's other work, the paper uses data from the rigid hard disk industry.

The papers main hypotheses are:

  • Firms that adopt a dominant design will be less likely to exit from an industry;
  • Firms that enter into an industry in what the authors refer to as a "window of learning" right before the dominant design emerges will be less likely to exit from an industry;
  • Firms that introduce architectural innovations into new markets will be less likely to exit.

Building on the methods in Singer and Willett, the authors offer an event history using discrete time survival to find the the likelihood of a firm exiting the industry in a given year and the effect of variables testing each of their hypotheses. They find that the adoption of the dominant design radically reduced the chance of a firms exit and that the the other two hypotheses were also supported.

Firms were very likely to exit (almost a 0.9 probability with their control variables in the model) and were only made more likely through the addition of controls.

In addition to their core finding that strategy matters, the authors propose that their model of a "window of opportunity" may be a more useful construct than "first mover advantages" -- especially in very fast-paced or high velocity environments.

Theoretical and Practical Relevance

The paper has been cited more than 250 times. Most of these citations are from the strategy literature or from the literature speaking to issues of firm survival -- especially from the perspective of technological innovation studies.