A competence-based view of industry evolution: The impact of submarket convergence on incumbent2entrant dynamics

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Abstract

Understanding intra-industry boundaries is important because it offers insight into firms' strategic options based on their competences. Defining intra-industry heterogeneity in terms of the technological and customer competences that are required to produce and sell different products in each submarket, this paper explores whether the convergence of these competences, i.e., an increase in the degree to which competences can be leveraged across submarkets, exerts differential effects on the success of industry incumbents versus entrants. Empirical evidence from the global semiconductor manufacturing industry shows that convergence in both technological and customer competences decreases entrants' survival chances, whereas a lack of convergence in any one of the two types of competence-that is, in one set of competences or another but not in both-gives entrants sufficient room to gain a foothold in the industry and to potentially disrupt incumbents. As a strategic response to disruption, multiplant industry incumbents can reposition themselves by changing their focus across submarkets while not necessarily exiting the industry entirely. The paper contributes to the literature on industry evolution, disruption, and competitive dynamics and has implications for future research and practice.

Original languageEnglish
Pages (from-to)738-768
Number of pages31
JournalAcademy of Management Journal
Volume61
Issue number2
DOIs
Publication statusPublished - Apr 2018
Externally publishedYes

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