TECHNOLOGY DISCONTINUITY SUMMARY AND EXAMPLE         2600w

When a major shift in technology occurs, it poses a significant challenge for the companies operating in the affected industry. The technology which forms the foundation of their products and markets may have been affected and the race begins to find a way to adapt to the new technology. In other to maintain competitive standing, the firm must find a way to exploit the new technology’s competencies (Christensen, Suarez, & Utterback, 1998; Tushman & Anderson 1986; Henderson & Clark, 1990). Because of technological discontinuity, matured organizations have three options to explore in order to acquire the new technology: merger or acquisition, develop the technology or an alliance. Utterback (1975) in his technology life cycle model said that there are three phases in technology life cycle and that for each phase there is an appropriate way of aligning with a partner. (He later added a fourth phase). However because of time and market pressures as well as Moore’s law on technology changing every 18 months, alliances seems to be the more attractive option. Rothaermel (2002) contends that alliances between mature firms and new entrants have been suggested as ways that mature firms can use to adapt to radical technological change. In particular, the paper is interested in seeking to explore why technological discontinuity motivates firms to enter into alliance.

1. Introduction

Technological discontinuities often create tremendous difficulties for incumbent firms. The most recent example of a technological discontinuity can be seen in the video rental industry,