A disruptive technology is a form of technology that significantly changes the performance of the product or service given a certain price (Anderson & Tushman, 1990; Christensen, 1997). Attributable to its superior functional performance, as opposed to cost, a disruptive technology is considered more appealing than existing products (Abernathy & Utterback, 1988). A commercializing young firm usually must introduce the innovation in a smaller and peripheral market as the disruptive technology is not fully developed when it is first brought to market (Adner, 2002), then as its performance improves, the firm with its disruptive technology enters a low-end market segment and moves upward as it continues to improve (Adner & Christensen 2002).
A disruptive technology has a primarily positive impact. As a disruptive technology can provide better functionality, meeting the higher requirement and demand of a larger base of customers, it has a primarily positive impact on social change, economic development, and industry structures. A disruptive technology may adversely impact those large firms who may be replaced by the younger technology-based firms with the innovation. Carayannopoulos (2009) considers four types of disruptive technologies, namely, radical, architectural, modular, and incremental.
There are characteristics of technology-based young firms and considerations for their survival and growth, including age of the firm, size of the firm, its market choice, network creation, legitimacy, and visibility. Personally, the two most important considerations are the legitimacy and market choice of the young firm:
- Legitimacy indicates the capability of the young firm to provide specific products or services (Oliver, 1991). Legitimacy is also a characteristic that can differentiate and cognitively distinguish its products or services from large firms and existing products. On the other hand, lack of legitimacy of the young firm and its product is beneficial when the firm is commercializing an architectural innovation rather than radical innovation.
- Market choice. The target market that a young firm decides to pursue exposes the firm and its disruptive technology to a different market segment, a different geographic region, different target audience, different expectations and demand of the customers, and different levels of competition from the well-established firms and products in the target market.
Carayannopoulos, S. (2009). How technology-based new firms leverage newness and smallness to commercialize disruptive technologies. Entrepreneurship: Theory & Practice, 33(2), 419–438.
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