Emergence of entrepreneurs following exogenous technological change

• Published in: Strategic management journal Vol. 20; no. 1; pp. 31 - 47
• Main Author: Arend, Richard J.
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01-01-1999; John Wiley and Sons; Wiley; John Wiley; Wiley Periodicals Inc
• Subjects: Applied sciences; Asymmetry; Business innovation; Competition; Competitive advantage; Cost efficiency; dynamics; Economic models; Emerging technology; entrepreneur; Entrepreneurs; Exact sciences and technology; Firm modelling; Fixed costs; Hypotheses; Incumbency; incumbent; Incumbents; Inertia; Information technology; Innovation; Innovations; Literature reviews; Nuclear power plants; Operational research and scientific management; Operational research. Management science; Prisoners; Rationality; Regression analysis; Studies; Symmetry; Technological change; Technological innovation; Technology; Trends; Uncertainty; Variable costs; United States > US; Competition; Innovation; Emergence; Computer; Regression; Strategy; Profit; Firm
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/(SICI)1097-0266(199901)20:1<31::AID-SMJ19>3.0.CO;2-O

This paper explains how, after an exogenous technological change occurs, entrepreneurs displace incumbents who were ex ante capable of exploiting any innovations that resulted from the change. The model initially considers classical economic assumptions in the context of process innovations, and then its robustness to uncertainty, bounded rationality, firm asymmetry, and product innovations are discussed. The model is preliminarily tested against industry trends, using both results from an analysis of the information technology sector and from the literature. The paper does not suffer from the inconsistency of explaining how capable incumbents are displaced by resorting to characterizations of incumbents as incapable due to some inefficiency; the paper models incumbents as efficient yet rationally choosing, in some instances, to be displaced.