Technological Evolution and Radical Innovation

Abstract

Technological change is perhaps the most powerful engine of growth in markets today. To harness this source of growth, firms need answers to key questions about the dynamics of technological change: (1) How do new technologies evolve? (2) How do rival technologies compete? and (3) How do firms deal with technological evolution? Currently, the literature suggests that a new technology seems to evolve along an S-shaped path, which starts below that of an old technology, intersects it once, and ends above the old technology. This belief is based on scattered empirical evidence and some circular definitions. Using new definitions and data on 14 technologies from four markets, the authors examine the shape and competitive dynamics of technological evolution. The results contradict the prediction of a single S-curve. Instead, technological evolution seems to follow a step function, with sharp improvements in performance following long periods of no improvement. Moreover, paths of rival technologies may cross more than once or not at all.