Technology Counteroffensive Strategies: Toward an Ex Ante View of Technology Substitution

Abstract

Although the canonical view of technology substitution describes the frequent failure of incumbent firms to adapt to new technologies, research suggests that firms adopt a variety of strategies when faced with a substitution. These include extending the incumbent technology, bridging to the new by creating hybrids of incumbent and threatening technology, and retreating to market niches in which incumbent technologies retain a competitive advantage. Because ex post views can depict such strategies as ineffectual in the face of inevitable substitution, we have a limited view of the impact of these strategies—whether, when, and how technology substitution occurs. In a study of technology substitution in the population of automobile carburetor manufacturers between 1979 and 1992, we find that these “technology counteroffensive” strategies effectively improved product performance, temporarily deferred technology substitution, and contributed to the continued survival of many firms. Significant firm outcome differences result from these strategies. The paper concludes by suggesting both a theory of technology hybrids and an ex ante theory of technology substitution as a complement to the dominant ex post view.