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Based on the Timothy Bresnahan, Shane Greenstein, and Rebecca Henderson’s article Schumpeterian Competition and Diseconomies of Scope, the authors suggest that in the past, the incumbent and successful firms fail in new markets due to the strategies they use in these markets. Other suggestions in this article include the fact that the organization frames of these big firms have been unable to flex appropriately for the new era in technology due to their fixed nature. Additionally, it is suggested that, the fear of cannibalization coupled with the underinvestment could also be a source of failure in these incumbent firms. However, the waves of innovative technology and activity threaten the best of firms notwithstanding their size and market control. This article refers to these bursts as the Schumpeterian bursts. The authors of these articles propose an assertion that diseconomies of scope are the keys to explaining the reason behind the failure of the incumbent firms to thrive in new markets and era of technology. I consider the assertion that, the source of these diseconomies as being valid as the argument is. The shared assets that are held by closely related firms in a market are subject to several forces in competition such as reputation and loyalty, which makes the dealings with these forces difficult in the economy. Considering the assertion that shared assets will likely be mismatched, I believe this assertion fails to explain why the flexibility of the other shared assets do not generate control and success in the era of new technology and new markets. The entry of new firms into an industry or the introduction of a new technology prompts several choices, which the firms are forced to deal with them. These changes inclu... ... middle of paper ... ...n firms with closely shared assets. Work Cited: Works Cited: Timothy Bresnahan, Shane Greenstein, & Rebecca Henderson. “Schumpeterian competition and diseconomies of scope; illustrations from the histories of Microsoft and IBM.” Harvard Business School. Pp. 1-69 Works Cited Breschi, S., Malerba, F. & Orsenigo, L. “Technological regimes and Schumpeterian patterns of innovation”. The Economic Journal, 110, (2000): 388-410. Bresnahan, T. Greenstein, S. & Henderson, R. “Schumpeterian competition and diseconomies of scope; illustrations from the histories of Microsoft and IBM.” Harvard Business School, Working Paper 11-077, (2011): 1-69. Marsili, O. The Anatomy and Evolution of Industries. Cheltenham: Edward Elgar, 2001. Nerkar, A. Paruchuri, S. “Evolution of R&D capabilities: role of knowledge networks within a firm”. Management Science, 51.5, (2005): 771-785.
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