Technological Opportunity and Technological Leadership Change

Technological opportunity, technological leadership change, and the latecomer’ R&D resource allocation between innovation and imitation

Abstract

This study examines when and how latecomers can surpass incumbents in technological capabilities with a focus on the role of technological opportunity. There is a disagreement in theoretical prediction and evidence on whether technological opportunity is conducive to the change of technological leadership. To reconcile this disagreement, we build a computational model on Schumpeterian competition in which incumbents and latecomers compete with innovation and imitation R&D. First, results suggest that technological opportunity indeed has the two opposing effects (i.e., positive and negative) on technological leadership change, and these effects create an inverted-U relationship. When there are few opportunities, leadership change is unlikely to happen because latecomers will hardly come up with a breakthrough. Also, abundant opportunities may not be conducive to leadership change either because incumbents move forward faster than latecomers. We further examine why these opposing effects exist by exploring latecomers’ R&D allocation between innovation and imitation. Results highlight that imitation R&D is a necessary condition for latecomers to leverage technological opportunity (i.e., enabling the positive effect of technological opportunity) and overcome their disadvantages under technologically munificent environment (i.e., mitigating the negative effect of technological opportunity).

Keyword: Schumpeterian competition, Technological opportunity, Technological leadership change, Imitation, Innovation

Author: sungyongchang

Hi! I am Sungyong Chang, an assistant professor of Strategy and Entrepreneurship at London Business School. My research interests lie in the area of creativity & innovation, and computational social science. You can also find my working papers in my CV, and on my SSRN page and Google Scholar. I graduated from Columbia Business School in May 2018 and earned BA in Business and Economics as a valedictorian from Seoul National University. I like to read science fiction & mystery novels, play board games, room-escape games, and travel. View all posts by sungyongchang