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Sofy Carayannopoulos

Can young emerging technology firms disrupt markets?

This conceptual paper was published when it was becoming clear that young tech firms – despite their lack of experience, resources and legitimacy - might successfully market innovative products. The author argues that these firms can compete effectively against large existing organizations because of their newness. The paper links four types of innovation – incremental, modular, architectural and radical - with sources of competitive advantage for new firms. 

What You Need to Know

A young firm’s newness is not always a liability when developing innovative technologies. Their lack of visibility and lack of legitimacy, coupled with agility, can be a source of advantage when creating radical and architectural innovations. 

More Details

What Did the Researcher Do? 

Sofy Carayannopoulos, a business professor with the Lazaridis School of Business and Economics, asked: When commercializing disruptive technologies, are there circumstances when firm newness is helpful to the disruption of large firms? To answer this, Carayannopoulos reviewed past research on:

  1. The liabilities of being new;
  2. The commercialization of disruptive technologies;
  3. The dynamics of firm rivalry; and
  4. The creation and implications of organizational legitimacy. 

What Did the Researcher Find? 

Carayannopoulos argues that young firms are more likely to successfully challenge incumbents with radical and architectural innovations in technology rather than modular or incremental innovations. Because young firms have low visibility and high agility, they can innovate faster than larger, less nimble organizations. Their lack of legitimacy allows them to enter a market before the incumbent has time to recognize the threat and respond. In these cases, the young firm benefits from their newness.  

How Can You Use This Research?

Young firms can use the arguments to focus their efforts where success is most likely: on radical and architecturally disruptive innovations. They can also determine the best time to become more public with their technology, maintaining low visibility as long as possible to prevent large incumbents from building barriers to entry. 

Established firms can use these arguments to protect their innovative assets by investing in modular and incremental disruptive innovations. They can also create small, nimble innovation divisions to leverage the advantages that young firms enjoy. 

Scholars can use the proposed model and hypotheses as a basis for programmatic investigation.

Want to Know More?

Contact: Sofy Carayannopoulos

Article citation: Caryannopoulos, Sofy (2009). How Technology-Based Firms Leverage Newness and Smallness to Commercialize Disruptive Technologies. Entrepreneurship Theory and Practice, 33, 2, pp. 419-438. 

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