IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO.
4, NOVEMBER 2002
Differentiating Market Strategies for
Disruptive Technologies
Steven T. Walsh, Member, IEEE, Bruce A. Kirchhoff, and Scott Newbert
Abstract—The literature is full of anecdotes that show new
small firms attacking existing markets with innovations based
upon disruptive technologies and achieving phenomenal success.
Because of this, some theorists argue that disruptive technologies
are best commercialized by new small firms. If this is true, can a
logical rationale be developed that explains this unique capacity
of new firms? If so, can empirical research of new and established
firms in an industry fraught with a disruptive technology identify
the advantages that new firms have over established firms in the
commercialization process? The purpose of this paper is to ex-
amine the different roles of established and new firms in disruptive
technology commercialization. The authors begin by developing
a model of the innovation process beginning with technology
creation and ending with user adoption and application. From
this model they develop propositions for testing. The authors use
survey data collected from 72 micro-electro-mechanical-systems
(MEMS) manufacturing firms. Their results from the MEMS
industry show that established firms rarely commercialize disrup-
tive technologies and then prefer to use market-pull strategies to
accomplish this. New firms select primarily disruptive technolo-
gies and choose either market-pull or technology-push strategies
for commercialization. Perhaps more important, time to market
for new firms is one-fourth that for established firms. These results
suggest that new firms have two advantages in commercialization
of disruptive technologies—flexibility in marketing strategy and
much shorter times to market.
Index Terms—Commercialization, disruptive technology,
market strategies, new firms’ advantages, survey of MEMS
industry managers, technology push versus market pull.
I. INTRODUCTION
T HERE IS widespread agreement that the commercializa-
tion of technological innovation has been a major contrib-
utor to contemporary industrialized nations’ wealth and pros-
perity. Many of these technological innovations are rooted in
disruptive technologies. The definition of disruptive technolo-
gies builds upon the strategic categorization scheme presented
by Bower and Christensen [10], Ehrenberg [14], and others.
They view technologies as either those that sustain the current
manufacturing practices and technological capabilities required
in an industrial setting or alternatively disrupt the current ca-
pability set required by a given market. Furthermore, disruptive
technologies are those that do not support current firm-based
Manuscript received Feburary 15, 2001; revised September 15, 2001. Review
of this manuscript was arranged by Special Issue Editors S. K. Kassicieh, B. A.
Kirchhoff, and S. T. Walsh.
S. T. Walsh is with the University of New Mexico, Albuquerque, 87131 NM
USA.
B. A. Kirchhoff is with the New Jersey Institute of Technology, Newark, NJ
07102-1982 USA (e-mail: kirchoff@njit.edu).
S. Newbert is with Rutgers University, Newark, NJ 07102 USA.
Digital Object Identifier 10.1109/TEM.2002.806718
0018-9391/02$17.00 © 2002 IEEE
341
manufacturing practices. In addition, Bower and Christensen
[10] state that a technology is considered disruptive when its
utility generates service products and/or physical products with
different performance attributes that may not be valued by ex-
isting customers. Moore [29] first stated this aspect of disruptive
technologies by noting that they generate discontinuous inno-
vations that require users/adopters to change their behavior in
order to make use of the innovation.
While disruptive technologies promise considerable oppor-
tunities for strong entry into existing and new markets, they
also involve high risk of failure because of customer resistance.
There are a growing number of corporate executives, especially
in large established firms who believe that the commercializa-
tion of disruptive technologies is an increasingly more costly
endeavor with greater uncertainty of success in a more rapidly
changing technological environment. This raises the question of
whether commercial activities based on disruptive technologies
can deliver appropriate and timely payoffs to investors. More-
over, firms with broad product lines may find that the disrup-
tive technology based innovation “disrupts” markets for their
existing profitable products thereby reducing revenues.
Disruptive technology creation and commercialization has
become the focus of financial concerns for both new and estab-
lished firms (Cooper and Smith [13]). In established firms dis-
ruptive technologies have traditionally been the responsibility
of R&D organizations. In new firms, technology creation is the
responsibility of everyone, especially the founders of the firm.
But, because of its unstructured nature and the uncertainty of the
technological outcomes, commercialization of disruptive tech-
nologies is hard to quantify and therefore justify in financial
terms. The commercial yield or “big payoffs” can take a long
time to emerge, many years as compared to the commercializa-
tion of evolutionary, or sustaining, technologies that are more in-
cremental in nature and may find widespread application within
months.
Much literature on disruptive technologies addresses the
difficulties organizations have in handling disruptive tech-
nologies rather than the opportunities they afford to those
that embrace them. There are significant advantages in or-
ganizational learning. Argyris and Schon [6] and Senge [35]
provide us with the idea of double loop learning when a firm
embraces a “radical” change and the benefits that are derived.
Such benefits can yield long term strategic advantages and
yield superior profits as compared to the easier “single loop”
learning that occurs when organizations embrace incremental
(or evolutionary) change. Similarly, the strategic literature
stresses the emergence of “strategic flexibility” and the de-
velopment of “dynamic capabilities” in response to disruptive
342 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 4, NOVEMBER 2002
change. Strategic flexibility is a strategy, which allows an
organization to embrace or eschew dynamic and discontinuous
developments in the firm’s environment (Brown and Eisenhardt
[11]). Similarly, the idea of building dynamic capabilities in
the firm to respond to technological change has been argued by
Teece et al. [37] and Eisenhardt and Martin [15]. These authors
suggest that such dynamic capabilities provide firms with an
ability to use resources to keep up with or create market change.
Such change creation leads to a new firm-based resource con-
figuration focused more on reacting to as well as developing an
environmental change for a firm-based competitive advantage.
Therefore, the process of identifying and developing strate-
gically important disruptive technologies is widely viewed as
vitally important to the future viability of technology intensive
firms. Disruptive technologies are seen as the birthplace of new
corporate technological competencies, the center of evolving
distinctive corporate competencies, and the epicenter from
which generations of improvements in corporate competencies
spring. Disruptive technologies clearly underlie the competitive
advantages of such firms.
Anecdotal evidence suggests that firms who commercialize
innovations based upon disruptive technologies face enormous
internal and market problems. It is not unusual for these firms
to experience conflict among technologists about the value of
the technology, difficulty with manufacturing processes, plus
resistance and occasionally refusal, by marketing managers to
promote and sell the product(s). Internal problems are com-
pounded by resistance from users regarding adoption, and, when
adopted, resistance to major changes in user behavior necessary
to implement the technology. One would expect new firms to be
more seriously impacted by these problems than are established
firms but new independent firms seem to handle these more suc-
cessfully [7], [4], [22], [34]. In fact, anecdotal evidence com-
bined with thoughtful analysis led Bower and Christensen [10]
to state that well-established corporations are poorly positioned
to introduce disruptive technologies into markets. Instead, they
recommend that such corporations form separate, independent,
new organizations to launch commercialization of new products
based upon disruptive technologies.
If new high technology firms outperform their larger more
established and resource rich cousins in the commercialization
of disruptive technologies, then the source of their advantage
should be searched out and identified so that technological
progress can be enhanced. Especially important are questions
about the technology selection process and the commercial-
ization methods that new firms apply. Formulated in strategic
terms, we need to learn what core competencies and capabilities
successful new high-tech firms use. And, we need to know what
market strategies they choose and why they choose these. It is
possible that appropriate identification of differences between
established and new firms may lead to a better understanding of
the innovation process and provide a foundation for improved
effectiveness in launching new disruptive technologies.
To examine the different roles of established and new firms
in disruptive technology commercialization, we begin by devel-
oping a model of the innovation process beginning with tech-
nology creation and ending with user adoption and application.
This model allows us to develop several propositions about the
differences between new and established firm innovators. Then,
we identify and describe an industry currently characterized by
numerous disruptive technological innovations, the microsys-
tems technology-based industry. Our data collection method-
ology is survey data collected from top level managers in this
industry. Our results show that new small firms and large es-
tablished firms differ in competencies applied and market entry
strategies used as well as time to market thereby confirming
most of our initial propositions.
II. DEVELOPMENT OF THE MODEL
Bower and Christensen [10] suggest a rather radical solu-
tion to the problems of disruptive technology commercializa-
tion. They recommend that commercialization be assigned to
new firms operating independently of a parent corporation. But,
to understand this recommendation, one must fully appreciate
the origins of disruptive technologies and the mechanisms by
which they become commercialized. For this reason, we con-
structed a model of the process and describe it in the following
paragraphs. The model is shown in Fig. 1.
A. Technology Sources
Technologies can originate either inside or outside an
industry. Those that originate inside are said to be based upon
“core competencies” of corporations in the industry as defined
by Prahalad and Hamel [32]. Those originating outside we
call “exogenous” borrowing the term from economics (Lambe
and Spekman [24]). They compete with products based on
evolutionary technologies and create new industries [17].
In theory, the pursuit of new technologies consistently cre-
ates new bases for building new distinctive core competencies
that provide sustainable competitive advantages. Prahalad and
Hammel [32] define core competencies as the technological
knowledge and abilities that underlie a corporation’s core prod-
ucts. Competitive advantage stems from the improvement of
user productivity and/or applicability of the new technology that
makes it preferred over alternative technologies. Sustainability
emerges because the original technologies that underlie the core
competencies yield strong patents and/or incorporate new pro-
prietary manufacturing technologies.
However, many, perhaps most, disruptive technologies origi-
nate outside of an existing industry. Some of these technologies
are developed by individual inventors. Others emerge from
corporate R&D efforts. Bower and Christensen [10] after
examining a number of innovations based upon disruptive
technologies make a somewhat radical recommendation that
disruptive technologies originating in corporate R&D labs be
commercialized by new independent firms. This is because
established firms have sustainable competitive advantages
with many satisfied customers that provide satisfactory profits.
Thus, it is difficult for the organization to pursue a technology
that is highly risky, potentially competitive to its own products,
and difficult to market since applications are in unfamiliar
industries [10].
Bower and Christensen note that new firms have not estab-
lished core competencies or a bevy of loyal customers. Thus,
WALSH et al.: DIFFERENTIATING MARKET STRATEGIES FOR DISRUPTIVE TECHNOLOGIES
Fig. 1. Disruptive technology innovation model.
such firms are free to tackle high risk technologies and unfa-
miliar markets. Furthermore, they can be highly focused on one
technology while having relatively low operating costs com-
pared to a corporate department or division. This is why they
recommend that disruptive technologies be given to new in-
dependent firms. In this way, these new firms adopt technolo-
gies from one industry and apply it in another, i.e., exogenous
technologies. Schumpeter [34] observed that innovations with a
major impact upon economic activity originate from outside the
industry that they affect. His observations agree with those of
Bower and Christensen. Schumpeter also argues that these in-
novations emerge from and become the reason for the formation
of new independent firms, i.e., entrepreneurship. To the extent
that Schumpeterian product innovations are technology based,
he argues that new independent firms are well suited to bring
innovations from outside the existing industry structure and cre-
atively destroy the market structure therein [34].
In practice, such technologies are not always best developed
by “spin-offs” from an established firm as suggested by Bower
and Christensen [10]. Technologies also are obtained by license
or purchase by a new independent firm from an inventor, an
R&D department in an established corporation, or a university
laboratory. Either way, disruptive technologies are only recog-
nized after they have been commercialized and have major im-
pact upon the market. Thus, early stage sources of inventions
are rarely considered important until their roles in this process
become apparent as the new independent firm achieves success.
B. Technology Focus
Morone [30], Bower and Christensen [10], Bitindo and
Frohman [8], Florida and Kenney [16], Marquis [26], Meyers
and Tucker [28], SEST-Euroconsult [36], Utterback [40], and
many others identify two classes of technology: 1) disruptive,
radical, emergent or step-function technologies, or alternatively,
2) evolutionary, sustaining, incremental or “nuts and bolts”
technologies. We will use the terms disruptive and evolutionary.
343
Disruptive Technology: Bower and Christensen [10] note
that disruptive technologies may not be “ radically new from
a technological point of view” but have superior “performance
trajectories” along critical dimensions that customers value.
Abernathy and Clark [2] do not agree on this point. They
argue that, due to disruptive technologies’ radical newness
or emergent character, robust manufacturing infrastructure
does not exist or is very limited in any commercial firm or
industrial setting [43]. Further, Anderson, and Tushman [5]
evolve from Abernathy and Clark [2] and others discussing an
“era of ferment” when a new technology product paradigms
are vying to become the industry dominant design. Measuring
and managing these technologies are difficult [9]. Actually,
a careful comparison of the two differing views reveals that
disruptive technologies have alternative forms. In other words,
the theorists agree that both forms of disruptive technologies
exist.
On the other hand, it is apparent that disruptive technologies
and their discontinuous innovations are important to economic
progress. Schumpeter [34] describes capitalism as an economic
system that finds its competitive strength in innovation that
creates new demand in new markets while destroying old
existing markets based on older technology. This product
innovative activity Schumpeter calls “creative destruction”
is clearly driven by what we call disruptive technologies.
Abernathy and Utterback [1] confirm this as they describe
disruptive technologies as those that create entirely new
technology-product-market paradigms that create new to the
world markets that may be opaque to customers. Opaqueness,
they note, constrains customer enthusiasm for varying their
established behavioral habits.
The inventions that emerge from disruptive technologies
are called discontinuous innovations and present problems to
the firms that commercialize them [20], [33]. The inventions
based upon disruptive technologies create a growth paradox
[21]. They create challenges to the marketing process since
344 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 4, NOVEMBER 2002
the inventions require users to change their behaviors to gain
the advantages the technologies have to offer [25], [41], [29].
Moore [29] has described the process of overcoming customer
objections to the change inherent in adopting a discontinuous
innovation as “crossing the chasm” by defining differing value
propositions that provide enough benefit to overcome resis-
tance to change. The mechanism for overcoming buyer/user
resistance to adopting disruptive technologies is demonstrating
that such technologies provide significant cost reductions
and/or performance improvements. In this way, customers are
found who are willing to take the risks of newness [27]. But,
customers are not usually resident in single-product/single-in-
dustry markets and truly disruptive technologies find uses in
many different markets in “lead user” groups [42].
Disruptive technologies create a sustainable competitive
advantage because they are based upon new technologies and
new inventions derived there from [19]. Such technologies and
inventions carry intellectual property protection that may last
the life of a patent or copyright, thereby providing a sustainable
competitive advantage. But, they also provide proprietary
markets for evolutionary technologies. Once user behaviors
are changed, the new technology becomes part of their regular
behavior patterns. As users identify new needs, evolutionary
technologies emerge from the disruptive technology base
and these are used to support research to create continuous
innovations that satisfy these emerging needs of users. In this
way, a disruptive technology leads to a stream of evolutionary
technologies. Evolutionary technologies produce continuous
innovations that constantly update and improve the current
usefulness of the disruptive technology based products [10],
[29].
Evolutionary Technologies: Evolutionary technologies
improve incrementally from a body of existing knowledge [17].
Bower and Christensen [10] call evolutionary technologies
“sustaining technologies,” that is technologies that sustain the
current manufacturing practices and technological capabilities
required in an industrial setting. We choose to use the term
“evolutionary” rather than the term “sustaining” because the
latter does not capture the continuously changing nature of
technology that actually characterizes the technology process.
Evolutionary technologies create innovations that are modifi-
cations of, improvements to, or replacements for existing prod-
ucts. These are called continuous innovations (Morone, 1995).
Evolutionary technologies often change incrementally moving
from the simple to the more complex. Evolutionary technolo-
gies do not alter markets the way that disruptive technologies
do as they do not require users to significantly change their be-
havior. Instead, evolutionary technologies often are driven by
customer demand for improvements of existing products; im-
provements make better products that fit current customer be-
haviors (Morone, 1995).
Typically, evolutionary technologies emerge from a dis-
continuous innovation which, when successful, creates its
own market for follow-on continuous innovations that provide
improvements and upgrades of customer based products.
In this way, companies that build on proprietary disruptive
technologies, evolve them into evolutionary technologies and
continue to evolve products from them to remain competitive
in rapidly changing markets.
C. Innovation Type
Innovation, by definition, means the commercialization of
invention [34]. Commercialization is widely perceived as the
process of bringing a product or service into working user ap-
plications. This is heavily dependent upon the process widely
referred to as marketing. Creating the innovative product that
can be sold is the most difficult step in converting a technology
into an innovation.
There are two types of innovations: discontinuous and
continuous. Discontinuous innovations evolve from disruptive
technology. Continuous innovations evolve from evolutionary
technology. Many theorists argue that discontinuous inno-
vations embody the technology characteristics that make it
difficult for buyers to adopt the innovative product. However,
that depends upon the market strategy adopted by the firm that
controls the technology. In fact, since the processes of product
development, marketing strategy and user application type are
not linear, it is best to treat all three steps of the model at once.
This we will do.
D. Factors Underlying the Innovation/Strategy/User
Application Mix
The innovation /strategy/user application mix is primarily de-
pendent on whether the technology is evolutionary or disrup-
tive. However, these technology types are more important in
designating whether or not the supplier has existing customers.
Therefore, we will concentrate on the firms with established
customer bases first and then on new firms that have no estab-
lished customers. However, before we begin the analysis of dif-
ferent types of firms, we begin with a review of theory regarding
different market strategies.
Strategies and Learning Theory: Most of the literature
linking learning theory to strategic theory stresses the dif-
ficulties in handling a disruptive technology rather than the
opportunities they provide to the organizations that embrace
them. Argyris and Schon [6] and Senge [35] provide us with the
idea of double loop learning when a firm embraces a “radical”
change versus easier single loop learning when embracing
incremental change. Similarly, strategic literature stresses
“strategic flexibility” and the development of “dynamic capa-
bilities” in response to disruptive change. Strategic flexibility
allows an organization to embrace or eschew dynamic and
discontinuous developments in the firm’s environment [11]
focusing on the difficulties the firm experiences in this process.
Similarly, the idea of building dynamic capabilities in the firm
[37] and [15] to respond to technological change provide the
firm with an ability to use resources to keep up with or create
market change. This provides firms a resource configuration
that provides options of reacting to or developing an environ-
mental change for a firm-based competitive advantage.
Two Categories of Market Strategies: Thus learning theory
gives us a rationale for understanding the interrelationship of
environment characteristics and firm resources that explains the
WALSH et al.: DIFFERENTIATING MARKET STRATEGIES FOR DISRUPTIVE TECHNOLOGIES
dual origins of innovations. Innovations may arise from tech-
nological development on its own accord or from buyer de-
mands that motivate technological development. Madiquis [26]
addresses this issue in his model of the innovation process that
focuses on the effects of discontinuous innovation. In the first
stage of the Madiquis model, called idea recognition, the source
of innovation is deemed to come either from the recognition of
technological feasibility, that is a “technology push,” or from
the recognition of potential demand, also known as “market
or buyer pull.” These two distinctions are also evident in eco-
nomic theory of entrepreneurial innovation where Kirzner [23]
hypothesizes that market conditions “pull” entrepreneurs into
markets by creating excess profit opportunities. On the other
hand, Schumpeter [34] theorizes that entrepreneurs destroy ex-
isting markets by forcibly entering with inventions of their own
creation. Theoretically, then, it seems likely that innovations can
occur for either reason.
Thus, there are two alternative market strategies to be applied
to our innovation model. In practice, these two represent ex-
tremes at either end of a continuous scale from technology push
to market pull.
Firms With an Established Customer Base: As noted
earlier, Bower and Christensen [10] perceived that firms with
an established customer base seem to have an advantage in
the offering new products to users. Where existing users are
accustomed to working with the supplier/manufacturer, the link
between the user and manufacturer has become very strong
since the installed base and switching costs make the customer
dependent on the manufacturer [1]. Furthermore, the users are
well aware of additional improvements and or replacements that
are needed for the products to better serve their needs. Thus,
users are always clamoring for this or that innovation to meet
their specific needs and suppliers need only respond to these
buyer demands to remain in a profitable business. The stream
of evolutionary technologies/continuous innovations that flow
from the core competencies built from long-term R&D will
tie the customer to the supplier’s continuous innovations for
many years and create a stream of profits for the supplier. True
market-pull innovations provide replacements, or substitutes,
for existing products. Such new products are quickly adopted
by existing customers if the replacements have clear price, cost
saving, and/or quality advantages over existing products.
Occasionally R&D will produce a unique invention that
builds on the core competence but does not respond to a known
user need. Such innovations may even require changes in cus-
tomers’ behavior. These innovations will require considerably
more marketing and sales efforts. As long as the new products
do not require substantial changes in customer behavior, derive
from the well known and trusted evolutionary technology base,
and offer significant cost and/or quality improvements, existing
customers will gradually adopt the new technology. In such
situations, the supplier organizes a special marketing effort to
“push” this invention onto the users. Since the technological
base is similar or identical to the existing products, the tech-
nology-push effort if properly designed is usually successful in
a relatively short time frame.
The Uniqueness of New Firms: New firms have no in-
stalled base nor established customer relationships. They
345
are constrained by this limitation and face resistance from
potential users to adopt their inventions derived from disruptive
technologies. New firm commercialization of discontinuous
innovations requires different activities and different time
periods for actions. Such activities can be characterized as
technology-push commercialization. The marketing effort is
seen as risky, expensive, and subject to high rates of failure
as new firms push their technologies on resistant potential
users [12]. For this reason, most theorists perceive customer
resistance as a major barrier to disruptive technology transfer.
Moreover, a pure technology-push market strategy entails a
long sales effort with few early adopters [29], [10].
However, anecdotal evidence suggests an alternative mar-
keting approach is often used to reduce the risk, cost, and
failure potential. Since new firms have no established cus-
tomer base, they are free to search for applications of their
technologies among existing needs of a wide variety of po-
tential customers in multiple industries. The corollary to this
logic is that new firms may find their greatest market advan-
tage through offering proprietary disruptive technologies to
established customers of established firms. The commercial-
ization strategy is to seek an entirely new (to the firm) set
of customers to adopt the firm’s proprietary technology as a
replacement or enhancement to the existing products of the
dominant firms in an industry; in this way, new firms can build
a customer base rather quickly. In other words, they use the
buyer-pull market strategy modifying their innovations into
user-friendly mechanisms to improve or replace existing prod-
ucts of established competitors. This strategy is lower risk,
lower cost, and may provide both a customer base and the
revenue receipts necessary to launch a full technology-push
market strategy for a truly discontinuous innovation based
upon disruptive technology.
Four Technology Strategy Mixes: The advantages of com-
mercializing disruptive technologies may well offset the greater
risks, costs, and initial longer term return on investment. How-
ever, as observed by Bower and Christensen [10] and expanded
upon by Christensen [45] there remains a strong tendency for
established firms to resist doing this, so much so these authors
argue, that it can best be done by new independent firms. Yet, it
is apparent that technologies are not easily defined as disruptive
or evolutionary as no one has been able to define a technology
as disruptive until after it has been commercialized long enough
to demonstrate major market share changes.
At the same time, experience has demonstrated that early
commercialization of disruptive technologies often occurs as re-
placements or substitutes for existing applications where the be-
havior change of the users is modest by strategic intent when
suppliers of the technology choose market strategies that em-
phasize identification of an existing buyer need and adoption of
the invention to this need.
This section has described applications of the tech-
nology-push and market-pull theories of technology transfer
adjusting for the two types of technologies. As a result, our
model displays four technology/market strategy typologies, two
for each technology category and market strategy. These are:
1) continuous innovations/market-pull strategies; 2) continuous
innovations/technology-push strategies; 3) discontinuous
346 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 4, NOVEMBER 2002
innovations/market-pull strategies; and 4) discontinuous inno-
vations/technology-push strategies.
E. Summary of the Model
Clearly, research that creates disruptive technologies and ex-
pands technological competencies is fundamental to long-term
core competence and the competitive advantage. Either a tech-
nology-push commercialization model or a market-pull strategy
can be used to gain sustainable competitive advantage.
Still, the common element among both discontinuous and
continuous innovations is the use of technical personnel to
create marketable products from technologies. Thus, the
technical specialists’ knowledge and skills are applicable to
both discontinuous and continuous innovations even though
the eventual product applications require different approaches
to market timing and marketing techniques.
III. PROPOSITIONS FOR TESTING
To systematically investigate the difference in approach to
commercialization of technologies offered by established and
new firms, we carried out a survey of upper level managers
and owner/founders of the micro-electro-mechanical systems
(MEMS) manufacturing industry. We developed three proposi-
tions to guide the creation of our survey instrument.
Based upon Bower and Christiansen’s [10] description of new
independent firms’ advantages in major discontinuous innova-
tion and their perception that established firms’ R&D is captive
to existing customers, our first two propositions are as follows.
Proposition 1: Established firms will primarily commer-
cialize evolutionary technologies.
Since new firms have no existing customers and new tech-
nology is their primary competitive advantage, Proposition 2 is
as follows.
Proposition 2: New firms will primarily commercialize dis-
ruptive technologies.
Even if a disruptive technology emerges from R&D, the influ-
ence of existing customers upon established firms’ innovation
commercialization strategies suggests established firms will use
market-pull strategies.
Proposition 3: Established firms will primarily use disrup-
tive technologies to respond to market-pull strategies (improve-
ments and/or replacement products).
Proposition 4 derives from the likelihood that new firms’
managers seek to establish a unique sustainable competitive
position, a position that is based upon an intellectual property
protected disruptive technology. Ultimately, the greatest value
can be extracted from a disruptive technology through a creative
destroying innovation pushed upon skeptical customers.
Proposition 4: New firms primarily develop technology-
push applications of disruptive technologies.
However, as noted earlier, the new firm may turn to supplying
replacement or substitute products to users of existing compet-
itive products so as to generate revenues that will be used to
support their R&D work toward the creative destroying innova-
tion. Such actions will dilute the appearance of technology-push
activity and cause rejection of Proposition 4.
In addition, we know new firms must have commercialization
advantages over established firms. Christensen [45] and Bower
and Christensen [10] argue that new firms have the advantage
of acting quickly so that they can be faster to the market with
new products.
Proposition5: New firms will have shorter times spans from
R&D to market than established firms.
IV. EMPIRICAL RESEARCH METHODOLOGY
We chose to draw our survey responses from a new industry
that appears to be emerging from within several other ex-
isting industries with the addition of disruptive manufacturing
(process) technologies unique to itself. We begin this section
with a brief description of the MEMS technology including
defining three main manufacturing methods. We then describe
results from our survey instrument containing a series of ques-
tions that ask: 1) the firm to define for its first commercialized
product the manufacturing method(s) used; 2) firm resident
distinctive technologies (competencies) and core capabilities
possessed; and 3) whether market-pull or technology-push
dominated product introduction. In addition, demographic
information was obtained including establishment and firm age
and size (number of employees). The firm (not the establish-
ment) is defined as the ownership unit of the respondent.1
A. Microsystems Technologies Description
Microsystems technologies are alternatively identified as
MEMS, Microsystems Technologies, or Micro Machined
Technologies. The differing nomenclature used to describe
MEMS technologies reflects not only its emergent nature but
also both regional preference and technological scope. MEMS
technologies are a relatively new and emerging technology
mainly based upon sophisticated manipulations of the same
silicon used in electronic devices such as RAM memory chips,
micro-processor chips, and a host of others. Instead of molding
plastic parts or machining metal to produce products, MEMS
devices are made by using some of the same processes used
to create microelectronic components but other techniques,
radically different than microelectronic techniques, are added
that create micromachines in the silicon base material that can
communicate with the electronic properties of the material.
Thus, the following three basic MEMS process technologies
characteristics described below suggest they are probable
disruptive technologies.
Microsystems technologies can be categorized into three
basic manufacturing technologies: 1) high aspect ratio mi-
cromachining (HARM); 2) bulk micromachining (BM); and
3) sacrificial surface micromachining (SSM) [44]. These three
production methods are frequently described as mutually
exclusive technological substitutes but in the future are more
likely to become complementary rather than competing man-
ufacturing technologies. Interestingly, to our knowledge, no
1A firm is a unit of ownership. An establishment is a place of work. For ex-
ample, General Motors is a single firm that owns almost 1000 establishments
including manufacturing plants, sales offices, training centers, and even loan of-
fices (GMAC).
WALSH et al.: DIFFERENTIATING MARKET STRATEGIES FOR DISRUPTIVE TECHNOLOGIES
obvious disruptive technology-based discontinuous innovation
with creative destruction potential is yet apparent. However,
given the typical technology evolutionary time period, it is still
early in the technology process for a truly market destroying
innovation to appear [34].
B. Survey Methodology
The goal of our survey was to establish a baseline for a lon-
gitudinal study to better understand the behavior of firms in an
emerging technology area. Toward this goal, we began with a
survey distributed to managers/owners of all firms that defined
themselves as active in this industry. The mechanism for iden-
tifying these firms was their attendance at the Fourth MEMS
Commercialization Conference held in September, 2000. Over
400 representatives from MEMS firms, government research
labs, university research labs, suppliers, consultants, etc., from
locations all over the world attended this conference. The ques-
tionnaire was distributed at the conferences and 74 of the 104
(71.1%) firms in attendance responded. Of these, only 62 pro-
vided complete responses. This gave us a 59.6% response rate.
This lower than expected response rate may be due to the fact
that many firms at the conference had not commercialized their
first MEMS products as yet.
The survey instrument consists of nine pages. The first page
consists of basic demographic information on the firm. The re-
maining eight pages consist of four pages of evaluative ques-
tions using a ten point Likert scale on a “not at all important” to
“critically important” evaluation scheme. The other four pages
ask for specific information on manufacturing costs, product
mix, R&D expenditures, and markets. This latter information
has not been applied herein.2
Operationalizing the Newness: The literature on innovation
frequently uses firm size as a surrogate for firm newness [3]
[13] [7] [4] [22]. Age and size are found to be highly correlated
among technology intensive small firms but not among large
established firms. And in our survey, we found that managers of
large established firms often do not know the age of their firm.
Therefore, we chose to use firm size as the variable to separate
new from established firms. Table I describes respondent firms
by size where we chose the size of fewer than 100 employees to
define new firms.
The basis for determining size was the size of the firm, i.e.,
overall ownership organization of the respondent. In other
words, if the respondent’s MEMS producing organization was
independently owned and employed 100 or fewer workers, it
was defined as new. If the firm was owned by another and/or
the combined employment was over 100, the firm was defined
as established.
The firms included in the set of complete responses have ex-
isting commercial products and/or marketable prototypes and
therefore we assume that they validly represent active industry
participants that have commercialized a MEMS product. The
respondents had as few as one microsystems-based product, or
as many as seventy such products, but the median and mode
number of products per firm was five.
2Inspection copies of the copyrighted survey instrument are available from
author Bruce A. Kirchhoff.
347
TABLE I
DESCRIPTION OF SURVEY RESPONDENTS
Operationalizing Technology Type: MEMS is a manu-
facturing or process technology intensive product. There are
technology subcategories within the three main manufacturing
technologies. We could not expect the survey respondents
to understand the theoretical concepts of evolutionary and
disruptive technologies, and therefore, to determine technology
type, the questionnaire contains a list of 21 known technologies
used in MEMS production world wide. This list was prepared
by one of the authors and reviewed by a panel of 15 other
experts. This panel classified the technologies into those that
are entirely new to MEMS and those that evolved from the
microelectronics industry or another related industry. Given
the specific nature of and unambiguous terminology used for
the technologies, very high agreement occurred among the
experts. Those that are entirely new to MEMS were defined
as disruptive technologies (four). Fourteen were defined as
evolutionary technologies. Three were classified as neither but
as well-known technologies from outside the microelectronics
industry and were not included in the following analysis.
Respondents were asked to rate the importance of each of the
21 technological production methods that fall within the three
basic categories described above on a ten point Likert scale. A
summary score for disruptive technology was calculated as the
mean score for the four disruptive technology methods. A mean
was also calculated for the fourteen evolutionary technology
methods. Given that the production of any MEMS product may
combine a mix of both disruptive and evolutionary technologies,
we created a “technology score” by subtracting the mean of the
disruptive technology four items from the mean of the evolu-
tionary technology fourteen items. O’Rielly and Chatman [31],
served as the example for using this scoring method for com-
puting a summary technology score. Firms with positive scores
are classified as using evolutionary technologies. Firms with
negative scores are classified as using disruptive technologies.
C. Operationalizing Market Strategies
The survey asked respondents to describe their reasons for
creating their first fully developed and produced MEMS device.
There are seven items in this section, four designed to measure
a strategy focus on technology and three to measure a strategy
focus on market demand. To assure ourselves that these items
measured two relatively independent aspects of strategy focus,
we factor analyzed the survey results using principal compo-
nents and varimax rotation. A list of the items and their factor
loadings are shown in Table II. Apparently our survey design
348 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 4, NOVEMBER 2002

TABLE II
FACTOR ANALYSIS RESULTS: STRATEGY ITEMS (n = 62)

was appropriate as two clean factors appear, thereby suggesting TABLE III
NUMBER OF FIRMS BY STRATEGY AND TECHNOLOGY (n = 62)
content validity of our selected items and suggesting our con-
cept of market-pull and technology-push strategies is a real part
of MEMS technology firms.
However, it is probable that some, perhaps all, firms use
some combination of market-pull and technology-push strate-
gies. Therefore, we created a single scale value for strategy of
each firm by subtracting the mean of the firm’s Likert scale
scores on the four technology-push items from the mean of the
firm’s Likert scale scores of the three market-pull items. Then,
firms with positive scores were classified as having market-pull
strategy and firms with negative scores were classified as
having technology-push strategies.

V. RESULTS
TABLE IV
Two strategy classes and the two technology classes serve as STRATEGY AND TECHNOLOGY COMPARISON BY FIRM SIZE
the basis for testing of our propositions. The distribution of the
firms among the four cells is shown in Table III.

A. Testing the Propositions

Table IV shows the 62 firms divided into the four
strategy/technology cells and separated into two columns
by new and established firm. The analysis of this matrix shows
that the differences among the cells although numerically
small are statistically significant. These tests are itemized at
the bottom of the table and show statistical significance of
or better.
Proposition 1 states that established firms will primarily com-
mercialize evolutionary technologies. As can be seen, 71.4%
(30) of the established firms commercialized evolutionary tech-
nologies and only 28.6% (12) of the established firms com-
mercialized disruptive technologies. Proposition 2 states that (35%, 7 firms) of new firms used market-pull strategies. Thus,
new firms will primarily commercialize disruptive technologies. our data analysis confirms Proposition 3 but not Proposition 4.
This is not strongly supported by our findings for although 60% All in all, new firms do not show a preference for disruptive
(12) of the new firms commercialized disruptive technologies, technologies with half of the firms choosing evolutionary
40.0% (8) commercialized evolutionary technologies. This is and half choosing disruptive technologies. And, among
not a statistically significant finding. those choosing disruptive technologies, the majority prefer
Proposition 3 states that established firms will primarily use market-pull strategies. This suggests that our belief that that
market-pull strategies to commercialize disruptive technolo- the majority of new firms choose disruptive technologies to
gies. Table IV confirms this proposition since 21.4% (9) of the enter markets because these provide a sustainable competitive
firms used market-pull strategies with disruptive technologies, advantage is incorrect. Perhaps new firms seek the necessary
only 7.1% (3) firms used technology-push strategies. However, revenue for survival first through meeting existing defined
for new firms, Proposition 4 is not confirmed. Rather than new market needs and only later commercialize creative destroying
firms primarily using technology-push strategies to commer- innovations. This should not surprise us for we are not aware
cialize disruptive technologies (25%, 5 firms), the majority of any truly creative destroying MEMS innovation that has
WALSH et al.: DIFFERENTIATING MARKET STRATEGIES FOR DISRUPTIVE TECHNOLOGIES 349

TABLE V
QUESTIONNAIRE ITEMS DEFINING MEMS LIFE CYCLE DESCRIPTIONS

yet entered the market place. Thus, we should expect that TABLE VI
new MEMS firms would have found other ways to fund their CYCLE TIME COMPARISON BY FIRM SIZE

existence. For example, in the 1980s, the U.S. automobile com-

panies were required to install air bags in all their automobiles.
Existing mechanical technology was expensive, large, and
heavy. What was needed was something small, inexpensive,
durable, and reliable. Market demand existed and was widely
known. The need was clearly apparent. MEMS technology
satisfied this demand. All that was necessary was to perfect the
manufacturing and prove the durability and reliability of this
new technology. A hard sell, but MEMS delivered what was
needed and made it economical to install two, three, or even six
or more airbags in every car. This was one of the earliest mass
applications of MEMS technology with millions sold annually
today. But there are many firms manufacturing this product
today since there is no proprietary product technology.
Testing Proposition Five: So, what advantages do new firms
have that draws them into commercialization of technologies?
that it is a major advantage that new firms have in technology
One item we sought to check was the time from product idea
commercialization. And, time is money.
development to sale of the first unit. We asked survey questions
to define three separate phases of the overall “concept to sale”
VI. CONCLUSION
cycle to see whether new firms excel and if so at what phase of
the process. Table V describes the questionnaire items that were Clearly, we have positive evidence supporting our proposi-
used to define the three phases of the cycle. tions about established firms. They tend to emphasize commer-
We requested that respondents provide months and years cialization of evolutionary technologies and prefer market-pull
when answering these questions. The number of firms an- strategies for the majority of their technologies. They especially
swering each phase differs. There is a decline in number eschew technology-push strategies for disruptive technologies.
of responses between the first and third phase suggesting This is not surprising and fits the pattern so many writers on in-
that some of the responding firms are not yet in the revenue novation have described.
generating phase. We included all respondents that answered However, our findings about new firms seem consistent with
each phase. Table VI shows the mean response for new and Bower and Christensen’s [10] conclusions that new small firms
established firms including the number of respondents and a are better able to commercialize disruptive technologies than
test for differences between means in each phase. established firms. Certainly a greater percentage of new firms
From Table VI, it can be seen that in all phases, the magni- commercialize, or attempt to commercialize, disruptive tech-
tude of the differences are huge; established firms require two nologies than do established firms. But, they use market-pull
to three times as long as new firms. But the small sample sizes strategies more often than technology-push strategies to do
and the large variances make Phase 1, idea to first expenditure, this. And, new firms also commercialize evolutionary tech-
and Phase 3, prototype to first sale, the only phases where the nologies and by using both market strategies, slightly favoring
differences are statistically significant at 0.05 or less. The full technology push. Yet, new firms certainly have a significant
cycle analysis shows differences of established firms 2.4 times advantage in time to market. This clearly is a strength that
(greater than two years) more than new firms and it is nearly sig- many innovation writers have noted.
nificant at the 0.05 level. Clearly, cycle time from idea to first But the real world of technological innovation is not as neat
sale is much, much shorter for new firms that for established as Bower and Christianson’s theory. New firms are faster at
firms. bringing ideas into innovations and selling them. But our data
Thus, it is likely that the time required for an idea to become and analysis tells us that they are equally likely to find existing
revenue is so much shorter for new firms than established firms market needs and to bend their disruptive technologies to meet
350 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 4, NOVEMBER 2002
these needs as to push their new technology on stoic buyers
who resist changing their behavior. Surprisingly, the lack of an
established customer base is an advantage for the new firms
attempting to market their new technology. Unfettered by de-
mands from existing customers for improvements on existing
products based upon evolutionary technologies, new firms can
be flexible about to whom they chose to sell and what applica-
tions can be profitably produced and sold. It is this flexibility
that probably underlies the much smaller cycle time in “proto-
type to first sale.”
Apparently, new firm behavior is less predictable than that of
established firms. New firms are not as well understood and de-
serve more attention since they are obviously the firms that will
fulfill the promises of disruptive technologies and creative de-
struction. Research on new firms and technology commercial-
ization is badly needed.
We are continuing to conduct surveys of firms in the MEMS
industry year after year in hope of having rich data when the
big creative destroying innovation emerges from this new tech-
nology either through new firms or established firms. But, we
are researching only one industry. Other researchers should find
similar new industries with potentially disruptive technologies
and begin to track them into the future.
We must caution the reader that our research reported here
does not measure success of commercialization by new firms.
Our survey does not include any firms that started and failed to
succeed but only those successful enough to continue in busi-
ness. Kirchhoff [22] researched all firms formed in the U.S.
during 1977–1978 and estimated the failure rate, after adjusting
for mergers and acquisitions, at approximately 40% to 50% after
six years.
Furthermore, readers need to be cautious about our use of firm
size as an appropriate indicator of firm newness. In his research,
Kirchhoff [22] concluded that employment at over 50% of new
firms does not grow at all during the first six years of life. Fur-
thermore, for those new firms in highly innovative industries,
there is a greater six-year failure rate among firms whose sales
revenue is stagnant. Thus, we might expect that new firms that
have grown beyond their start up team are actually older than
other firms of the same size that started with a larger start up
team. So size may not be correlated with age as it appears to be
in this small sample. If age is not a significant measure of what
is meant by “new firm,” then our size measure may have dis-
torted our results. Future research should develop more careful
measures of firm age, a very difficult variable to measure unless
one asks one or more founders of a firm. This is because a new
firm may be formed with every change in majority ownership
of the same legal entity; venture capitalists may take control, or
the firm may merge with another or be acquired. When does a
firm “really” begin operations? It is difficult to find a reliable
methodology to answer to this question.
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[36] “Le Bonzai de I’industrie Japonais, Elements de Reflexion sur L’integre- Bruce A. Kirchhoff received the B.S. degree in chemical engineering from the
tion de Technologie Dans la Function Strategique des Enteprises Japon- Case Institute of Technology and the M.B.A. and Ph.D. degree in business ad-
aises,” French Ministry of Res. Technol., 1984. ministration (with a concentration on finance, economics, management, and sta-
[37] D. Teece, G. Pisano, and A. Shuen, “Dynamic capabilities and strategic tistics) from the University of Utah, Salt Lake City.
management,” Strategic Management J., vol. 18, pp. 509–533, 1997. Prior to receiving the Ph.D. degree, he spent seven years in sales and mar-
[38] M. L. Tushman and L. Rosenkopf, “Organizational determinants of tech- keting and three years as area manager of international operations for Envirotech
nological change: Toward a sociology of technological evolution,” Res. Corporation. He is currently a Distinguished Professor of Entrepreneurship and
Organizational Behavior, vol. 14, pp. 311–347, 1992. Director of the Technological Entrepreneurship Program, New Jersey Institute
[39] M. L. Tushman, P. C. Anderson, and C. O’Reilly, “Technology cycles, of Technology, Newark, NJ. His prior credentials include service as Chief Econ-
innovation streams, ambidextrous organizations: Organizational re- omist for the U.S. Small Business Administration and as Assistant Director of
newal through innovation streams and strategic change,” in Managing the Minority Business Development Agency, U.S. Department of Commerce.
Strategic Innovation and Change, Tushman and Anderson, Eds. New He was Director of the Center for Entrepreneurship and Public Policy, Fair-
York: Oxford Univ. Press, 1997. leigh Dickinson University, and Director of Research in the Entrepreneurship
[40] J. Utterback, Mastering the Dynamics of Innovation. Boston, MA: Center, Babson College. He also served on the faculties of Chalmers University
Harvard Business School Press, 1994. of Technology; Jonkoping International Business School of Sweden; the Uni-
[41] R. Veryzer, “Discontinuous innovation and the new product develop- versity of Nebraska, Omaha; Purdue University; California Polytechnic State
ment process,” J. Product Innovation Management, vol. 15, no. 4, pp. University; and the University of Utah. He has authored over 100 published
304–321, 1998. articles and papers on entrepreneurship, economic development, and business
[42] E. Von Hippel, “Lead users: A source of novel product concepts,” in strategy in a variety of academic journals, books, trade and popular media. His
Readings in the Management of Innovation, 2nd ed., M. L. Tushman book, Entrepreneurship and Dynamic Capitalism: The Economics of Business
and W. Moore, Eds. Ballinger, 1986, pp. 352–366. Firm Foundation and Growth (Westport, CT: Praeger, 1994), describes how en-
[43] S. Walsh and J. Linton, “Infrastructure for emerging markets based on trepreneurship contributes to economic growth. He was recently cited by INC
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Eng. Management J., vol. 12, no. 2, pp. 23–31, 2000.
[44] S. Walsh, J. Linton, R. Grace, S. Marshall, and J. Knutti, “MEMS,
microsystems, micromachines: Commercializing an emergent dis-
ruptive technology,” in MEMS and MOEMS Technol. Applicat., P.
Rai-Choudry, Ed. Billingham, WA: SPIE—Int. Soc. Optical Eng.
Development, 2000, pp. 479–514. Scott Newbert received the B.S. degree from Colgate University and the MBA
[45] C. Christensen, The Innovator’s Dilemma. Boston, MA: Harvard Bus. degree from Monmouth University. Currently he is a doctoral candidate at
School Press, 1997. Rutgers University in the Organization Management Department where he is
majoring in entrepreneurship and strategy.
Prior to joining Rutgers University he worked in sales for Hershey Foods Cor-
poration and as an athletics coach at Monmouth University. His current research
Steven T. Walsh (S’94–M’95) received the B.S.
interests include the macroeconomic antecedents to and growth implications
degree in biomedical engineering and the Ph.D.
of technology intensive entrepreneurial firms. He also co-founded a privately
degree in strategy with specialization in manage-
owned marketing research and consulting firm.
ment of technology and entrepreneurship from
Rensselaer Polytechnic Institute, Troy, NY. He also
holds a certificate of Advanced Studies in business
administration from Northeastern University and an
MBA in marketing and new product planning.
Dr. Walsh is the Director of Technological
Entrepreneurship at the University of New Mexico,
Albuquerque, where he has been awarded the Black
Professorship of Entrepreneurship. He has been a director of a Fortune 500
company division and president of entrepreneurial firms. He has published
well over 100 articles serving both the academic and practitioner communities.
He has been a plenary or invited speaker numerous times at many universities
and national laboratories in the United States and on four other continents.
Further, he has served as a plenary speaker for many academic and industrial
organizations such as the International Association of Management of Tech-
nology (IAMOT), The International Society for Optical Engineering (SPIE),
the Micro and Nano Technological Commercialization Education Foundation
(MANCEF), Semiconductor Equipment and Materials International (SEMI),
and the International Association of Product Development Professionals
(IAPD). He is the Founding President for the MANCEF.
Dr. Walsh is a member of the board of reviewers for the IEEE TRANSACTIONS
ON ENGINEERING MANAGEMENT, an Associate Editor for Microsystems Com-
mercialization and Silicon Processing for the SPIE Journal of Microlithography,
Microfabrication, and Microsystems, an Area Editor for the Engineering Man-
agement Journal, and a Special Issue Editor for IEEE TRANSACTIONS ON
ENGINEERING MANAGEMENT and other journals. He is Co-chair for the
international technology roadmap for Micro and Top Down Nano Systems, a
Board Member of the MESA Institute at Sandia National Laboratories, and a
Member of the Board of advisors of R&D magazine’s Micro Machine Devices
magazine.