©2005 INFORMS Technological Discontinuities and Complementary Assets: A Longitudinal Study of Industry and Firm Performance

We suggest that the type of complementary assets (generic versus specialized) needed to commercialize a new tech-nology is critical in determining the industry- and firm-level performance implications of a competence-destroying technological discontinuity. At the industry level, we hypothesize that incumbent industry performance declines if the new technology can be commercialized through generic complementary assets, whereas incumbent industry performance improves if the new technology can be commercialized through specialized complementary assets. At the firm level, we posit that an incumbent firm’s financial strength has a stronger positive impact on firm performance in the postdiscontinuity time period if the new technology can be commercialized through generic complementary assets. We hypothesize, however, that an incumbent firm’s R&D capability has a stronger positive impact on firm performance in the postdiscontinuity time period if the new technology can be commercialized through specialized complementary assets. Drawing on multi-industry, time series, and panel data over a 26-year period to analyze pre- and postdiscontinuity industry and firm performance, we find broad support for our theoretical model. Key words: technological discontinuities; complementary assets; incumbent industry and firm performance heterogeneity; time series and panel data analyses In one of the most influential works in economics during the twentieth century, Joseph Schumpeter (1942) posited that “the process of Creative Destruction is th