A Competence-Based View of Industry Evolution: The Impact of Submarket Convergence on Incumbent−Entrant Dynamics

Abstract

Understanding intra-industry boundaries is important because it offers insight into firms' strategic options based on their competences. Defining intra-industry heterogeneity in terms of the technological and customer competences that are required to produce and sell different products in each submarket, this paper explores whether the convergence of these competences, i.e., an increase in the degree to which competences can be leveraged across submarkets, exerts differential effects on the success of industry incumbents versus entrants. Empirical evidence from the global semiconductor manufacturing industry shows that convergence in both technological and customer competences decreases entrants' survival chances, whereas a lack of convergence in any one of the two types of competence-that is, in one set of competences or another but not in both-gives entrants sufficient room to gain a foothold in the industry and to potentially disrupt incumbents. As a strategic response to disruption, multiplant industry incumbents can reposition themselves by changing their focus across submarkets while not necessarily exiting the industry entirely. The paper contributes to the literature on industry evolution, disruption, and competitive dynamics and has implications for future research and practice.

Which Service? How Industry Conditions Shape Firms’ Service‐Type Choices

“…Furthermore, the competence lens on industry evolution offers additional insights that help us understand the mechanisms connecting industry conditions to firms’ service‐type choices. The competence‐based view of industry evolution suggests that addressing the challenges, such as the uncertainty that different industry conditions bring to the fore, will require different competence strategies (Bauer, Dao, Matzler, and Tarba, ; Uzunca, ). For example, the challenges emerging in the early stages of the industry life cycle are very different from those that appear in the later stages and different competence strategies may be required to address them.…”

“…Furthermore, this article contributes to research on servitization by further clarifying the role of services in firm strategy and improving understanding of the mechanisms that govern the complex relationship between products and services (Baines et al, ; Benedettini, Neely, and Swink, ; Eggert, Thiesbrummel, and Deutscher, ; Fang et al, ). This article also contributes to the literature on industry and organizational evolution more broadly by shedding new light on the strategic role services play and by proposing technological uncertainty and value generation uncertainty as environmental mechanisms that drive distinct competence strategy choices (Adner and Kapoor, ; Cusumano et al, ; Suarez et al, ; Uzunca, ).…”

“…Drawing on the competence‐based view of industry evolution (Uzunca, ), this article theorizes and provides evidence that servitization represents a competence‐exploiting and a competence‐building response to counter the uncertainty posed by different industry conditions. This is done in several steps.…”

“…This is done in several steps. First, drawing on the competence‐based view of industry evolution (Uzunca, ), specific types of uncertainty that firms face under each of the industry conditions that influence servitization are identified, as well as the competences that help face this uncertainty. Second, drawing on the servitization literature, this article distinguishes between two types of services that are based on different competences: product‐oriented (PO) services that are performed on the product and, therefore, share technological competences with the products (e.g., installation, monitoring and maintenance, product customization), and customer‐oriented (CO) services that build on the existing marketing/customer competences but are based on entirely new technological competences—for example, management consulting, financing, logistics (Baines et al, ; Fang et al, ; Mathieu, ).…”

Embracing Bewilderment: Responding to Technological Disruption in Heterogeneous Market Environments

“…However, despite the pervasiveness of this recommendation, many firms are unsuccessful in responding to disruption (Christensen et al, ; Fuentelsaz et al, ; King and Baatartogtokh, ; Uzunca, ) raising the question of the validity, feasibility, or boundaries of such an internal fit perspective. The universality of the strategic alignment perspective has recently been challenged by the idea that consistency can become less viable when firms face diverse contingencies and conflicting requirements (Le Breton‐Miller and Miller, ; Poulis and Poulis, ; Smith, ).…”