ANATOMY OF DISRUPTIVE TECHNOLOGIES: ANALYSES AND COMPARISON A dissertation submitted to the Kent State University Graduate School of Business in partial fulfillment of the requirements for the degree of Doctor of Philosophy by Eileen D. Weisenbach Keller December, 2005 Dissertation written by Eileen D. Weisenbach Keller B.S., Indiana University, 1983 M.B.A., The University of Chicago, 1992 Ph.D., Kent State University, 2005 Approved by William Shanklin, Ph.D. Co-Chair Doctoral Dissertation Committee Marvin Troutt, Ph.D. Co-Chair Doctoral Dissertation Committee O. Felix Offodile, Ph.D. Robert Krampf, Ph.D. Accepted by Donald Williams, Ph.D. Doctoral Director, Graduate School of Management Donald Williams, Ph.D. Dean, Graduate School of Management ii ACKNOWLEDGEMENTS The willingness of so many people to support and assist me through this long journey is a blessing I will cherish forever. Your inputs were varied and many and this research would never have developed as it did without the input from others. Appreciation goes to my co-workers, doctoral student colleagues and friends. Through fruitless explorations, taxing analyses and rewrites, you all believed in me, offered your expertise and opinions and bolstered my determination. I want to thank my dissertation committee: Dr. Felix Offodile, Dr. Marvin Troutt and Dr. William Shanklin. Traveling through this process with you has been enlightening. Felix Offodile has been there for all of the questions regarding the details of the undertaking. Regardless of the hour of the day, no matter how high the stacks of administrative memos on his desk, Dr. Offodile thoughtfully answered all of my questions, sharing with me his considerable knowledge and expertise. For this I am grateful. Marvin Troutt, my co-chairman, was the person who assured me throughout the process that the research I was conducting had value, and that the creativity I brought to the project was worthwhile and perhaps even indispensable. At times when I wasn’t sure anyone knew I was conducting research, Dr. Troutt would send an email with a new source of information or stop by with a book to assist me in pushing to a new level of knowledge and analysis. I will always remember the example he set for how to be a good teacher, mentor, researcher and professional. William Shanklin, my co-chairman, through his consummate professionalism, has contributed to my development as an academic in more ways than I can list. He was the source of the idea for this research, igniting my interest during the doctoral coursework. He was always available for every question and provided guidance through every challenge. His persistence has influenced and taught me to do high quality work that has become a new standard from which I will build and grow throughout my career. His contribution to my academic life is second to none and I will never forget what he has taught me. Finally, I express my gratitude to my family. To my parents and siblings for faith, faith in God and faith in me. To my children, Kevin, Marilyn and Andrew, you are light and love; you bring me so much joy. Thank you for being wonderful and for reminding me daily what is most important in life. Above all, my deepest gratitude goes to Mark Keller, my husband and the love of my life. You have been my unending source of hope, mirth, strength, and love throughout this long journey. You have been father and mother to our children at times when I was working. iii You have worked hard and provided for us when there seemed to be no time to work. You have been my coach, my confidant, my cheerleader, and my spiritual rock. Thank you, I dedicate this dissertation to you with gratitude, love and respect. iv TABLE OF CONTENTS TABLE OF CONTENTS......................................................................................................V LIST OF FIGURES............................................................................................................VII LIST OF TABLES............................................................................................................ VIII CHAPTER 1 OVERVIEW AND PURPOSE .....................................................................1 RESEARCH QUESTIONS AND SIGNIFICANCE THEREOF ..........................................................2 Eye of the Beholder ..........................................................................................................5 ORGANIZATION OF THE DISSERTATION.................................................................................7 CHAPTER 2 LITERATURE REVIEW, CONCEPTUAL FRAMEWORK, AND PROPOSITIONS....................................................................................................................9 Technology Cycle ...........................................................................................................11 THE CONTEXTUAL LITERATURE: FIRM LEVEL ANALYSIS .................................................16 Firm Level Analysis: Resource Dependence and Resource Allocation.......................16 Firm Level Analysis: Dynamic Capabilities and Core Rigidities................................21 DISRUPTIVE TECHNOLOGY AND DISRUPTION RANGE.........................................................23 The elements and necessary conditions of the model....................................................24 Interactions among the elements ...................................................................................30 Disruption Range ...........................................................................................................33 CHAPTER 3 RESEARCH METHODOLOGY..............................................................36 CHOICE OF CASE STUDY METHOD ......................................................................................36 DEFINITIONS ........................................................................................................................37 THE RESEARCH DESIGN ......................................................................................................41 Case Inferences to Theory Development .......................................................................42 Application and Validation of Case Inferences.............................................................44 SELECTION OF INDUSTRIES..................................................................................................44 UNDERSTANDING THE DISRUPTION RANGE ........................................................................47 Sources of Evidence and Data Collection Methods......................................................47 UNDERSTANDING STRATEGIC RESPONSE AND FIRM PERFORMANCE .................................53 Sources of Data and Data Collection Method ..............................................................53 RELIABILITY AND VALIDITY OF THE FINDINGS ...................................................................57 CHAPTER 4 ANALYSIS AND FINDINGS....................................................................61 TELECOM INDUSTRY ANALYSIS (PROPOSITIONS 1-6).........................................................61 Density (Propositions 1 and 2) ......................................................................................61 Intensity (Proposition 3).................................................................................................63 Revenues (Propositions 4 and 5) ...................................................................................64 v Summary (Proposition 6 and Definition) ......................................................................68 MOTION PICTURES VS. TV INDUSTRY ANALYSIS (PROPOSITIONS 1-6)..............................69 Count and Intensity (Propositions 1, 2 and 3)...............................................................70 Revenues (Propositions 4 and 5) ...................................................................................73 Summary (Proposition 6 and Definition) ......................................................................76 MOVIEGOING VS. VIDEO RENTAL BUSINESS (PROPOSITIONS 1-6) .....................................78 Count (Proposition 1 and 2) ..........................................................................................78 Intensity (Proposition 3).................................................................................................80 Revenues (Propositions 4 and 5) ...................................................................................81 Summary (Proposition 6 and Definition) ......................................................................85 DISRUPTION RANGE DESCRIPTION - ACROSS INDUSTRY ANALYSIS...................................86 Comparing the Findings to the Extant Literature .........................................................89 ANATOMY OF DISRUPTIVE TECHNOLOGIES ........................................................................92 MAINFRAME COMPUTERS VS. PERSONAL COMPUTERS (PCS): DISRUPTION RANGE .........95 Analysis and Categorization of this Disruption ............................................................95 MAINFRAME COMPUTERS VS. PCS: STRATEGIC RESPONSE AND FIRM PERFORMANCE ...100 Qualitative Analysis .....................................................................................................101 Statistical Analysis........................................................................................................102 CHAPTER 5 CONCLUSIONS AND STRATEGIC IMPLICATIONS ....................107 DISRUPTION RANGE ..........................................................................................................107