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Summary of the articles from the lecture Global Strategy and Marketing
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Summary of the articles related to the course Global Strategy and Marketing at University of Twente
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Differentiating Market Strategies for Disruptive TechnologiesWalsh et al. (2002)
The purpose of this paper is to examine the different roles of established and new firms in
disruptive technology commercialization.
Established firms rarely commercialize disruptive technologies and then prefer to use market-
pull strategies for commercialization. Perhaps more important, time to market for new firms is
one-fourth that for established firms. These results suggest that new firms have two
advantages in commercialization of disruptive technologies – flexibility in marketing strategy
and much shorter times to market.
Key problem and Goal
Previous literature suggests that well-established firms are poorly positioned to introduce
disruptive technologies into markets. It seems that it is better for large corporations to form
separate, independent, new organizations to launch the commercialization of new products
based upon disruptive technologies.
If it is true that new, smaller firms are better at commercializing disruptive technologies, it is
important to understand the source of their advantage so that technological progress
can be facilitated.
It is important to learn what core competences and capabilities are used by successful
new high-tech firms, and what market strategies are adopted and why.
Key theory
The authors start from Bower and Christensen whose research argues that commercialization
of disruptive technology should be assigned to new firms operating independently of a parent.
In order to better understand this proposition, the authors develop a model mapping the
process of disruptive technology innovation.
Disruptive Innovation Model
Description of the Model
Technology Sources
Technology can originate inside if based on core competencies or outside when
exogenous. Most disruptive technologies originate outside the industry, some of them
,developed by individual inventors. Others are the results of R&D activities. In any case, it is
difficult for established firms to pursue new risky technologies and therefore, even the ones
developed in house, should be commercialized by a new independent firm especially
because:
New firms don’t have yet core competencies or loyal customers
New firms are free to tackle high risk techs and unfamiliar markets
New firms can highly focus on one tech.
Technology Focus
There are two classes of technologies:
Disruptive: are responsible for the Schumpeterian creative disruption and for
creating entirely new technology-product-market paradigms as explained by
Utterback & Abernathy. Because of the discontinuous innovation require to produce
disruptive technologies, commercialization is hard, as consumers need to accept new
value propositions that provide enough benefits to overcome the discomfort of
changing habits.
Evolutionary: are improvements from existing knowledge. They emerge from a
discontinuous innovation that has found its market.
Innovation Type
Innovation means commercialization of invention. This can happen in a continuous or
discontinuous fashion.
Factors Underlying the Innovation/Strategy/User Application Mix
There are two alternative market strategies, which represent extremes at either end of a
continuous scale from technology push and market pull. Generally, market pull is
effectuated by existing large firms (i.e. gradual improvements on a smartphone after the
introduction of the iPhone), whereas technology push is a risky business that is better done by
new firms (i.e. Uber, AirBnB, WhatsApp, are all disrupting large industries whose players failed
to recognize opportunities for change).
There are four technology strategy mixes:
1. Continuous innovation/market pull strategy
2. Continuous innovation/technology push strategy
3. Discontinuous innovation/market pull strategy
4. Discontinuous innovation/technology push strategy
Research Question
The authors develop 5 propositions:
Prop 1: Established will primarily commercialize evolutionary technologies. (True)
Prop 2: New firms will primarily commercialize disruptive technologies. (not true)
Prop 3: Established firms will primarily use disruptive technologies to respond to market-
pull strategies. (True)
Prop 4: New firms primarily develop technology push applications of disruptive
technologies (with the aim of getting a sustainable competitive position that is
based upon an intellectual property protected disrupted technology). (Not true)
Prop 5: New firms will have shorter times spans from R&D than established firms. (true)
Key Results
Based on this study, new firms do not show a preference for disruptive technologies, with half
of the firms choosing evolutionary and half choosing disruptive technologies. Among those
choosing disruptive technologies, the majority prefers market-pull strategies, probably cause
they are less risky and so it is more likely to generate revenue and enable the new firm to
survive.
,In addition, cycle time from idea to first sale is much shorter for new firms than for established
firms, and so we can assume that the time for an idea to generate revenue is much shorter
for new firms, granting a major advantage to new firms in the commercialization of new
technologies.
Implications for theory and practice
Established firms rather commercialize evolutionary technologies following a market-pull
strategy in the majority of cases.
Established firms avoid technology-push strategy especially for disruptive technologies.
New small firms are better able to commercialize disruptive technology than established
firms, however, in doing so, they more often use a market-pull strategy rather than a
technology push one.
Also, new firms commercialize evolutionary technologies as well, and they do so by using both
market strategies, slightly favoring technology push.
Finally, new firms have a clear advantage in time to market. This might be due to the fact that
new firms are unfettered by demands from existing customers for improvement on existing
products and therefore they can be flexible to whom to sell and what to sell (to a certain
extent).
However, new firms are not as well understood as established firms, and more research is on
new firms and commercialization is needed.
Exploring the effect of strategic positioning on firm performance in the e-
business context
Kim et al. (2008)
Key problem and Goal
There is relatively little research done to empirically test the relationship between strategic
positioning and firm performance. The paper does two things:
1. It investigates what kind of strategic positions exist in the e-business context, and
2. It empirically tests the role of strategic positioning in explaining firm performance.
The paper suggests that the combination of an innovative differentiation strategy (IDS)
with technological resources strongly affects firm performance in the dynamics of an
unstable e-business context.
Key Theory
Mainly based on strategic management research, and therefore on the work of Porter, who
describes strategic positioning as the strategic action to find the best mixture of strategies to
defend a firm against the competitive forces in the industry. In determining such strategic
positioning, there are two major perspectives:
Competitive Strategy View: an outside-in perspective rooted in industrial organization
literature, which sees industry structure as unit of analysis as the industry determines the
performance of the firm. Porter, however, shifts the focus on the firm, by suggesting that firms
can position themselves within the five forces of an industry and exploit the industry
structure.
Resource-Based View: an inside-out perspective, which argues that firm-specific resources
and capabilities are the factors determining firm performance. Those resources are described
as valuable, rare, difficult to imitate, and to substitute.
, Reconciliation of the Two Views by Kim et al
The authors assume that both views shape the strategic positioning of a firm, which in turn
will affect business performance. This is based on the concept of strategic fit between
environmental factors and organizational factors, as illustrated in the figure below.
Competitive Intensity: more intensity equals less profit, and therefore less chances of
survival of a firm in the long term.
Technological Turbulence: e-business can suffer from volatility of products, services,
consumer demand, and sales. This volatility is the result of technological, economic, and
cultural change.
Environmental Complexity: heterogeneity of activities in an organization, this create
complexity which creates uncertainty, which in turn creates difficulties for firms to choose a
proper strategy.
Communication Effectiveness: facilitates the transfer of skills and social interactions. This
affects organizational climate, which in turn can affect firm performance.
Intellectual Resources: confer monopoly power and therefore higher profits.
Technological Resources: this refers to knowledge, products, processes, tools, methods,
and systems to create goods and services. This can obviously create competitive advantage
and increase firm performance.
Hypotheses
H1: The perceptions of environmental factors and resources by companies choosing
different strategic positions are significantly different. (True)
H2: The performance of companies pursuing different strategic position is significantly
different from that of others. (True)
Results
Firms with different perceptions of the environment and of the resources that they have
may take different strategic positions against each other, which leads to a statistically
significant disparity in firm performance
From the data can be inferred that in the e-business context, the role of Innovative
Differentiation Strategy (IDS) is critical to firm performance.
It seems that Cost Leadership Strategy (CLS) is considered to be a basic strategy for all
firms, and it has weak power to enhance competitive advantage for firms.
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