Schumpeter famously popularized "creative destruction" as the process whereby new entrants replaced existing firms. In most cases, however, some incumbent firms survive and even thrive across technological discontinuities. Moving beyond incumbent-entrant dynamics, organizations and innovation research has begun to explore incumbent heterogeneity in response to technological change-why some incumbents do well and adapt, whereas others struggle. As a phenomenon-driven research area, scholars with different theoretical perspectives have brought their own lenses to bear, but these perspectives have evolved independently. The result is a research stream with a scattered collection of detailed, within-industry perspectives on the phenomenon without a clear ability to link different mechanisms or articulate boundary conditions. This article brings these relevant literatures together to paint a more holistic picture of incumbent adaptation to technological change. To improve generalizability and begin building a more general, cross-industry theory, we emphasize recognizing specific nuances of different technological changes and how they fit with the existing capabilities, knowledge, position, and cognition of incumbent firms to understand which incumbents are swept away in the wave of creative destruction and which may survive.
Research summary
We examine how heterogeneity in customers' tendencies to single‐home or multi‐home affects a platform's competitive responses to new entrants in the market. We first develop a formal model to generate predictions about how a platform will respond. We then empirically test it, leveraging a historical setting: TV station entry into local U.S. newspaper markets from 1945 to 1963. A notable feature of this setting is a quasi‐natural experiment: the staggered geographic and temporal rollout of TV stations that was temporarily halted during the Korean War. We find that platform firms indeed take their customers' homing tendencies into account in their responses to competition: after a TV station enters the newspaper market, newspaper firms with more single‐homing consumers had lower subscription prices, circulations, and advertising rates.
Managerial summary
The theoretical and empirical results in our paper suggest that platform firms operating in multi‐sided market settings need to consider their customers' single‐homing and multi‐homing tendencies. Heterogeneity in these tendencies is an important demand‐side factor to consider when formulating responses to a competitor's entry.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.