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CUSTOMER POWER, STRATEGIC INVESTMENT, AND THE FAILURE OF LEADING FIRMS
Author(s) -
CHRISTENSEN CLAYTON M.,
BOWER JOSEPH L.
Publication year - 1996
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(199603)17:3<197::aid-smj804>3.0.co;2-u
Subject(s) - industrial organization , business , mainstream , emerging technologies , process (computing) , investment (military) , resource (disambiguation) , marketing , bottleneck , technological change , emerging markets , commerce , economics , operations management , politics , finance , computer science , political science , law , computer network , philosophy , theology , artificial intelligence , macroeconomics , operating system
Why might firms be regarded as astutely managed at one point, yet subsequently lose their positions of industry leadership when faced with technological change? We present a model, grounded in a study of the world disk drive industry, that charts the process through which the demands of a firm's customers shape the allocation of resources in technological innovation—a model that links theories of resource dependence and resource allocation. We show that established firms led the industry in developing technologies of every sort—even radical ones—whenever the technologies addressed existing customers' needs. The same firms failed to develop simpler technologies that initially were only useful in emerging markets, because impetus coalesces behind, and resources are allocated to, programs targeting powerful customers. Projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources. Because the rate of technical progress can exceed the performance demanded in a market, technologies which initially can only be used in emerging markets later can invade mainstream ones, carrying entrant firms to victory over established companies.