Alexander Pfister

Technological Efficiency and Organizational Inertia: A Model of the Emergence of Disruption

We study the influence of technological efficiency and organizational inertia on the emergence of competition when firms decide myopically. Using a multi-agent computer simulation model, we observe the competitive reaction of a former monopolist to the advent of a new competitor. While the entrant uses a new technology, the monopolist is free either to stick to his former technology or to switch to the new one. We find that—irrespective of details regarding the demand side—a change of industry leadership occurs only if the new (“disruptive”) technology is not too efficient and organizations are inert.

Adaptive Erwartungsbildung und Finanzmarktdynamik

SummaryBased on a classical financial market model we discuss three model variants, each focusing on a different approach in the formation of (heterogeneous) beliefs about future asset prices: the concept of Consistent Expectations, the concept of Adaptive Belief Systems, and artificial financial markets, where beliefs (or expectations) are formed by Classifier Systems. We analyze the consequences of these different mechanisms of expectations formation on the equilibrium dynamics of asset prices and compare statistical properties of returns generated by these models with the characteristics of real world time series.

Disruptive Technologies: the Threat and its Defense

Based on extensive long-term studies of the disk drive and other industries, Christensen (1997) introduced the concept of “disruptive technology”. According to Christensen, initially such a technology is employed in a novel market segment, and, when judged according to the features most relevant to the incumbents’ current customers, is inferior to the technology used by the incumbents in the established market segment. Nevertheless, over time the firms using the disruptive technology are able to successfully invade the established market segment from the lower end of the market and industry leadership changes. Christensen’s finding provides empirical support to the resource-based and organizational learning perspective of the theory of the firm, whereas other approaches in general predict advantages for incumbents due to learning by doing, economies of scale and scope, network economies of scale, etc. (see, e.g., Klepper and Simons, 1997; Rumelt, 1981; Mas-Colell et al., 1995). Table 1 provides an example of a disruptive technology: 5.25 inch disk drives were used in the early eighties’ desktop computers and, initially, were inferior to the 8 inch drives used in minicomputers in terms of capacity, access time and cost/MB – the features most relevant to a minicomputer user. However, by 1986 industry leadership changed from CDC, the leading 8 inch vendor, to the new entrant Seagate, and most of the firms that were producing 8 inch drives vanished (see Christensen, 1993, p. 543). Christensen also demonstrates that it is the incumbents who are leading in “sustaining technologies”, i.e. innovations that follow the current trajectory of technological improvement, and are trying to find new technical solutions to tackle the flattening of the current technology’s S-curve. Thus, technological (in)competency cannot explain the failure of industry leaders, but this is rather done by factors rooted in the way new