Through 25 years of radical breakthroughs in biotechnology, the top ranks of the pharmaceutical industry have remained virtually unchanged. Meanwhile, in the disk drive industry, each new generation of technology has caused the market leaders to stumble and new companies to take their places.When does innovation lead to radical changes in market leadership, and when does it reinforce the status quo? Most research to date has focused on the characteristics of specific innovations, such as their “radicalness” or fit with current customers' needs. But a new study suggests that this is only part of the story. In order to understand how innovation by startups affects industry dynamics, the authors argue, we also need to analyze the institutional and economic environment that entrepreneurs face.The October 2001 study is “When Does Start-Up Innovation Spur the Gale of Creative Destruction?” by Joshua S. Gans, professor of management at Melbourne Business School; David H. Hsu, a doctoral candidate at MIT's Sloan School of Management; and Scott Stern, associate professor of management and strategy at Northwestern University's Kellogg School of Management.Startups, the authors observe, have two options when it comes to commercializing innovations.
