Speaker(s): Richard S. Rosenbloom (HBS)
Title:
Abstract
Do the winds of change powering Schumpeterian "Creative
Destruction" blow in a new direction in the "New Economy"?
Schumpeter has influenced generations of scholarship on technology by his insight that economic progress is marked by recurrent gales of "creative destruction" arising from revolutionary changes in technologies whose consequences strike at the foundations and "the very lives" of existing firms. This talk will suggest that a new "ecology of innovation" in the late 20th Century may have increased the vulnerability of established firms in periods of rapid change. The "case" to be examined will focus on the consequences of innovations in general purpose information technologies in the 1950s and the 1990s.
Much of economic growth, productivity improvement, and industrial turmoil can be traced to the working out of long-run consequences of a relatively small number of General Purpose Technologies [GPTs]. Examples of GPTs from earlier centuries include the steam engine, electrification, cheap steel, and the internal combustion engine. This talk will examine the consequences of two pairs of more recent fundamental inventions: the transistor and the stored-program digital computer (late 1940s) and the microprocessor and the internet (early1970s). We will consider only the their proximate effects on the information technology industries, although there obviously have been far broader consequences throughout the industrial societies.
In the 1950s the telecommunications and the business equipment industries represented the core providers of equipment and services for Information Technology [IT]. Five firms with roots in the 19th century dominated this sector: telecommunications was monopolized by the AT&T Corporation; four long-established firms held 80% of the domestic business equipment market. All these firms survived and prospered in the wake of the dramatic consequences of the spread of the new semiconductor and computer technologies in the next quarter-century. AT&T, of course, was protected by a regulatory regime that lasted until the 1980s. The business equipment firms, while arguably they had been very vulnerable, all survived (and prospered) despite assaults by ambitious start-ups and powerful giants like RCA and GE trying to exploit the new technologies.
A generation later, the story was dramatically different. The giant equipment-making component of AT&T, Western Electric (now Lucent) was driven nearly to bankruptcy in the late 1990s. Of the major producers of computers in 1980, all but IBM and Hewlett-Packard were destroyed or at least driven out of the computer business during the same period. By the late 1990s, the pace and direction of change in information technology was being led not by the major incumbents of 1980 but by a host of new firms, like Microsoft, Intel, Cisco, Sun, and their spinoffs and rivals.
One cannot argue that these industrial consequences were
so different because the inventions of the 1970s were sufficiently different or
more powerful than the new technologies of the 1940s. The differences between
the two eras lie in the changes in the nature of markets, in the character of
business institutions, and of the role of government. In other words, a
radically different ecology of innovation led the winds of change along
different channels. The seminar talk will examine whether these differences
might represent a lasting shift in the social character of technological change.
[1] Schumpeter also identifies changes in markets and in the organization of firms as triggers of creative destruction. See Capitalisim, Socialism, and Democracy , Harper perrenial edition (1975) pp. 83-84.
[2] The notion of IT industries, of course, did not exist at that time. The earliest usage in the Nexis-Lexis data base is in 1982. (Financial Times (London,England) December 4, 1982,)