Adaptation to Technological Discontinuities: How Demand-side Disruptions Favor Incumbents

Technological discontinuities present both opportunities and challenges for incumbent firms. Furthermore, the impact of technological discontinuities extends beyond the realm of supply-side factors, exerting a transformative influence on demand-side conditions. Specifically, the characteristics of customers may undergo radical changes in a new technological generation due to shifts in their preferences and, at times, the emergence of a new customer segment. This paper investigates the implications of incumbents’ market-related capabilities in adapting to technological discontinuities by recognizing the demand-side changes influenced by their prior market experiences. We conduct empirical tests on our hypotheses using longitudinal data on market entry and exit within various technological generations in the computer printer industry throughout its entire life cycle. Our findings indicate that the preceding market experiences associated with the emerging customer segment may constitute a contributing factor to incumbent heterogeneity, influencing the successful continuation of their business in subsequent technological epochs.