Technological evolution and competitive response

This paper focuses and extends some emerging views on technological evolution and competition. First, that over the evolution of many product‐market segments there is a generalizable pattern, a shift from the investment characteristics of product technology to those of process technology as the primary focus of competition. Eventually, market price falls below production costs, not because firms face U‐shaped cost curves, but because of shifts in demand to the innovative form of the product. To this framework is added a hypothesis on the evolving risk structure of rival investments. The interaction of required and realized returns then provides a stopping rule for technologically‐driven competition which is different from the static case. Because technological change within a segment is non‐controllable but predictable the production functions and organization structures of participating firms must change in generalizable ways which can be used to predict industry structure. For the competing organization, these changes require particular kinds of decisions which are particularly suited to the level of the organization's strategic management.