delayed creative destruction and the coexistence of technologies

J. Eng. Technol. Manage. 20 (2003) 345–365

Delayed creative destruction and thecoexistence of technologies

Anil Nair a,∗, David Ahlstromb

a Department of Business Administration, College of Business and Public Administration,Old Dominion University, Norfolk, VA 23529, USA

b Department of Management, The Chinese University of Hong Kong, Shatin, NT, Hong Kong, PR China

Abstract

Disruptive innovations often engage in a fierce battle with incumbent technologies for hegemony.Past studies on technological innovations are silent about factors that extend the duration of the‘era of ferment’—that is, the period during which competing technologies fight for dominance.We argue that complexity of the underlying technology, ecological and institutional dynamics maypermit coexistence of competing technology regimes. The paper illustrates such coexistence bydiscussing the persistence of disparate technologies in steel making and kidney disease treatment.We conclude that the process of ‘creative destruction’ can be delayed in certain settings.© 2003 Elsevier B.V. All rights reserved.

Keywords:Technology persistence; Technology cycle; Disruptive technology

1. Introduction

Radical competence-destroying technological innovations within an industry set in mo-tion a battle for dominance between the incumbent and new technologies (Cooper andSchendel, 1976; Tushman and Anderson, 1986; Anderson and Tushman, 1990). This pe-riod of turbulence is thought to culminate with the emergence of a dominant technologi-cal design (Abernathy and Utterback, 1978; Clark, 1985; Tushman and Anderson, 1986;Anderson and Tushman, 1990) and the ushering in of an era of sustaining technologies(Christensen, 1997). The winning technology, of course, does not necessarily have to bethe superior technology (Arthur, 1996; David, 1985; Garud et al., 1997). Instead, dominantdesigns emerge through a process of social, economic and political negotiation and selec-tion (Bijker et al., 1987; Garud and Rappa, 1994; Garud and Ahlstrom, 1997a). Firms that

∗ Corresponding author. Tel.:+757-683-6096; fax:+757-683-5639.E-mail addresses:[email protected] (A. Nair), [email protected] (D. Ahlstrom).

0923-4748/$ – see front matter © 2003 Elsevier B.V. All rights reserved.doi:10.1016/j.jengtecman.2003.08.003

346 A. Nair, D. Ahlstrom / J. Eng. Technol. Manage. 20 (2003) 345–365

move early to adopt what becomes the dominant design usually survive and prosper to facethe next technology battle; firms that stick with the “non-dominant” technology are sweptaside by the gales of creative destruction (Christensen, 1997; Schumpeter, 1934; Tushmanand Anderson, 1986). This pattern of technological innovation, its subsequent evolutionculminating in the emergence of a dominant design, and the impact of such changes inorganizational populations is referred to as the “technology cycle model” (Anderson andTushman, 1990; Rosenkopf and Tushman, 1994).

While the above depiction of the innovation and transformation process explains thecycle in technological systems in many settings, there are instances when the competitiveinteraction between competing technologies does not unfold in such a linear and system-atic manner. For example, in the computer industry, the DOS/Wintel PC and Macintoshcomputers have coexisted for an extended period. Similarly, the coexistence of competingtechnologies and architectures is evident in a variety of settings—in aircrafts: propellersversus jet engines, and in pharmaceutical research: traditional pharmacological researchversus biotechnology method of drug development. In these instances, interaction betweencompeting technological regimes did not result in the emergence of a clear winner.

Thus, in this article we ask if creative destruction can be delayed, and what factors mayenable the duration of ferment and turbulence to be extended? These questions are importantas they can inform organizational investment decisions in periods of technological change.We propose that factors, such as, the complexity of competing technologies, institutional andecological dynamics drive the interaction among the competing technologies and influenceevolutionary outcomes. Thus, this article encourages a more multifaceted conceptualizationof technological innovations and their subsequent evolution.

This article is organized as follows: first, it describes the literature on technologicalinnovations and change. Then it describes and analyzes some key innovations in steel makingand kidney disease treatment, and interprets the persistence of competing technologies inthe two settings. This analysis allows us to develop propositions linking factors that extendthe period of ferment, and allow competing technologies to coexist. We finally conclude bydiscussing directions for future research on competition in technological systems.

2. Technological innovations and creative destruction

The technology cycle model draws upon work in economics, technology, organizationsand sociology to depict the nature of technological innovations, and its subsequent evolu-tion (Tushman and Anderson, 1986; Anderson and Tushman, 1990). In technology relatedmarkets, particularly those characterized by increasing returns, the technology cycle modelconceives a technological innovation as a somewhat stochastic process (Dosi, 1984; David,1985; Arthur, 1989, 1996). Disruptive innovations can give rise to a period of ferment,where different versions of the disruptive technology compete with each other, and with theincumbent technology for dominance (Anderson and Tushman, 1990; Christensen, 1997).1

1 Anderson and Tushman (1990)argued that a radical innovation is competency destroying, that is, it makesthe skills and capabilities involved in the incumbent technology obsolete. Such technologies tend to introducefundamentally new products or processes with substantial improvements in cost and quality.

A. Nair, D. Ahlstrom / J. Eng. Technol. Manage. 20 (2003) 345–365 347

This period of turbulence concludes with the emergence of a technological winner and anew technological standard (Arthur, 1996). A complex unfolding process that includes eco-nomic, social, political and strategic elements determines the winner (Bijker et al., 1987).The winner eventually becomes the dominant design or industry standard, and the los-ing standard gradually disappears.2 This has been broadly characterized as the process ofcreative destruction (Schumpeter, 1934, 1950).

The emergence of the winner is followed by a period of incremental changes, or sustainingtechnological developments, until another disruptive innovation sets in motion another battlefor dominance (Christensen, 1997; Dosi, 1984; Schumpeter, 1934, 1950; Tushman andAnderson, 1986). Christensen (1997)has shown that the fixed disk drive industry in the1980s was characterized by such a cycle; almost in every instance disruptive technologieswere developed and adopted by new entrants into the industry. Newer technologies thatcarry a different standard and design gradually replaced older technologies. Older firms thatinitially rejected the new product architecture often found that they were unable to moveto the new standard in time and as a result most of the incumbent firms failed or exitedthe business (Bower and Christensen, 1995; Christensen, 1997). According toChristensen(1997), almost all the disruptive technologies were introduced by new entrants. The cyclewas repeated several times as firms (and their technologies) rose and then fell, only tobe replaced by new firms with new disk drive technology. In each case a new productarchitecture promptly displaced the old one.

In this understanding of technological change, the coexistence of technologies is atransient, unstable phenomenon that culminates with the emergence of a dominant techno-logical regime. Such an interpretation leaves the duration of the period of ferment am-biguous, and downplays the institutional and technical factors affecting it (Garud andAhlstrom, 1997a; Tushman and Murmann, 1998). For instance,Schumpeter (1950, p. 83)observes:

This process of Creative Destruction is the essential fact about capitalism. It is whatcapitalism consists in and what every capitalism concern has got to live in. This factbears upon our problems in two ways.

First, since we are dealing with a process whose every element takesconsiderabletime in revealing its true features and ultimate effect, there is no point in appraising theperformance of that processex visuof a given point of time; we must judge its performanceover time,as it unfolds through decades or centuries. (Italics added)

In Anderson and Tushman’s (1990)study of cement, container glass, flat glass, andminicomputers industries, the duration of ferment, before emergence of a standard, rangedfrom 7 to 20 years. This variation of duration of the period of ferment, and the factorsthat influence it, raises questions about the period of ferment itself, as opposed to the out-come alone. We believe that the period of ferment may be important for understandinginteraction and coevolution of competing technologies; it is during this period that com-peting technologies, and firms or groups sponsoring them, adopt strategies, and specificcontextual dynamics—ecological, technological or institutional—influence the outcome of

2 A dominant design is said to have emerged when more than 50% of new installations use the technology(Anderson and Tushman, 1990).


the competitive interactions (Garud and Rappa, 1994; Garud and Ahlstrom, 1997b). Thus,we examine instances when the period of ferment has been extended, to the point wheredifferent technologies coexist in a state of competitive tension. Next the coexistence of dis-tinct competitive technologies are recounted and analyzed in two disparate settings: steelmanufacturing and chronic kidney disease treatment.

These two industry settings were chosen as research sites for the following reasons. Firstboth industries experienced long periods of time where competing technological regimescoexisted. This differed from the battle that often unfolds between competing architectures,such as Betamax and VHS, or the aforementioned disk drive industry. The long histories per-mitted the slow moving technology adoption and diffusion processes to be better observed(Ahlstrom and Garud, 1996; Van de Ven and Garud, 1989). Second, there is considerableinformation readily available on the two industries. Both industries have a manageablenumber of visible firms and decision makers, and their discussions about where the fieldshould be headed were often of public record. The chronic kidney disease field in the US, inparticular, has a very careful record of its deliberations, and decisions, both in the scientificpress and government records (Ahlstrom, 1996; Ahlstrom and Garud, 1996). This not onlyensured extensive information was available, but also that different viewpoints were wellcovered. Finally, a situation where seemingly disparate settings still manage to yield similarresults presents a robust research site for examining the phenomenon in question (Fisher,2001; Yin, 1994).

In addition, the period of ferment is helpful in better understanding how technologicalcompetition unfolds. This is important in that many current assessments of technologicalferment treat the process as stochastic and unstable. Many technological systems, particu-larly those characterized by increasing returns (Arthur, 1996) are depicted as chaotic (David,1985; Arthur, 1996), influenced by random events and tipping to standards (Arthur, 1989;Gladwell, 2000), where no general equilibrium exists (Arthur, 1996; Evans and Wurster,2000). But there may be some common events that characterize competitive dynamics dur-ing a period of ferment that may be more understandable and not just random in nature(Garud and Rappa, 1994; Hamel and Prahalad, 1994). Thus it is helpful to study eras offerment for some more systematic characteristics that emerge from an environment wheretechnological regimes coexist, even when it seems the system should tip to one standard infavour of the other (Gladwell, 2000).

3. Steel making

In early twentieth century, steel was commonly produced in two stages; first, the iron-orewas converted into pig iron, and subsequently the pig iron was reduced into steel.3 Theconversion of iron-ore into pig iron was carried out in the blast furnace (BF), and the

3 Steel products come in many grades and are classified into two broad groups: ordinary steel and specialtysteel. Ordinary, or carbon steel, contains less than 0.6 wt.% carbon. In contrast, specialty steel in addition to thecarbon content contains many alloying elements like molybdenum, tungsten, vanadium, chromium, nickel andmanganese that provide it with special mechanical, physical and corrosion-resistant properties. In the rest of ourdiscussion, ‘steel’ refers to carbon steel.


subsequent conversion of pig iron into molten steel was carried out in the Bessemer fur-nace. This molten steel was first cast into ingots, and then forged and rolled into differ-ent sizes and shapes. Large plants were built that were capable of performing all stagesof the steel making process. These plants typically had facilities to manufacture coke(used in the reduction process), produce pig iron from iron-ore (in blast furnaces) (Besse-mer) furnaces for reducing iron into steel, and forging and rolling facilities to shape steelinto the desired sizes. Such plants came to be known as integrated mills or integratedplants.

A disruptive innovation first appeared in the early part of the 20th century that producedsteel by passing a high-energy electric current through a charge of ferrous scrap and alloyingelements (Christensen, 1997). This technology came to be known as the electric arc furnace(EAF) method of steel making. However, because of the cost of electricity and capacitylimits of transformers, this process was limited to producing small quantities of steel. Hence,early EAFs were confined to the production of special alloy steel. Small firms, that wereoften located close to sources of scrap and markets that required such special steel, usedthese furnaces (Hogan, 1987).

Steel making technologies were refined and improved during the first-half of the century.In the integrated mills, the open hearth furnace (OHF) gradually replaced the Bessemerfurnace, and by 1966 production through the Bessemer route in the US was almost neg-ligible. Improvements to furnace lining, electrodes, and transformer capacity improvedthe production capabilities of EAF. These improvements allowed the use of the elec-tric arc furnace to produce ordinary carbon steel.4 Later, additional improvements in theEAF such as, more efficient power use, water-cooled panel for refractories, and reducedheat time made this steel-melting route more attractive. The capacity of the typical elec-tric arc furnace was still much smaller than the average integrated mill. However, thisalso meant that it cost much less to set up an ordinary steel production plant using theEAF.

By the end of the 1960s, steel plants using EAF were supplying about 5% of the US steelmarket, producing mostly bars and rods (Hogan, 1987). They were located near their marketsand scrap supplies. Their share of steel production increased to 12% in the mid-1970s(Hogan, 1987). The late 1970s then saw the emergence of the market minimills, whichwent beyond a narrow geographic region and instead specialized in a narrow range ofproducts that could be sold over a broad geographic area.

Thus, the carbon steel industry now comprised two distinct groups of firms: the minimillsand the integrated mills. The minimills used the EAF to melt steel, whereas the large scaleintegrated mills used a combination of BF and basic oxygen furnace (BOF) to melt steel.The two groups, the integrated mills and the minimills, were present in other steel producingcountries as well, however their relative strengths within each country was a function ofthe availability of ferrous scrap and iron-ore, unique evolutionary path of the industry andinstitutional environments (D’Costa, 1999).

4 In 1921, US Steel installed an experimental EAF with 3 tonnes capacity to produce carbon steel (USISS,1981). The minimills originated in the 1930s when Northwestern Steel and Wire Company began using an EAFto produce carbon steel (Barnett and Crandall, 1986). Firms that used electric arc furnace technology to melt steelcame to be known as minimills in the 1960s (Hogan, 1987).


4. Coexistence of technologies in steel

There are a number of factors that may have enabled the coexistence of competing tech-nologies within the steel industry. Specifically, this section examines how the complexityof steel making technology as well as ecological factors contributed to the persistence ofdistinct technologies in the industry.

4.1. Complexity of technology

The classical depiction (Anderson and Tushman, 1990; Dosi, 1984; Schumpeter, 1934,1950; Tushman and Anderson, 1986) of industry transformation following an innovationassumes that the innovation occurs in simple systems. In such instances, evolution is based onthe interaction among the competing technological regimes and organizations.Rosenkopfand Tushman (1994)note that while technology cycle models are useful for examiningthe development of simpler components or subsystems of larger products or technologies,they are insufficient to explain evolution in complex systems. They argue that a complexproduct or process is composed of components, linkages, and interfaces (Tushman andRosenkopf, 1992; Tushman and Murmann, 1998). For example, the automobile comprisesseveral subsystems—the power generation subsystem, the transmission subsystem, andthe cooling subsystem—to name a few. Each subsystem contains its own subsystem, forinstance, the transmission subsystem is comprised of the differential box, the suspensionsystem, and so forth.

Thus, the evolution of the automobile is an outcome of the innovations and evolutionsof the subsystems and constrained or facilitated by the nature of linkages among them,perhaps evolving at different rates (Tushman and Murmann, 1998). Similarly, technologicalcomplexity can be conceived at the process level. For instance,Kotha and Dunbar (1997)note that piano making involves distinctive stages: rim-bending process, the soundboardassembly, the development of the action assembly, and final assembly of all components.Therefore, it can be argued that the technology of piano making is complex involving severalsubsystems that are linked together and can evolve at different rates.

The linkages and interfaces among the components or subsystems determine the in-teraction among subsystems. The nature of linkages and interfaces among subsystems inthe case of process technologies may be interpreted usingThompson’s (1967)framework.Thompson (1967)conceived a framework of technological interdependency between sub-systems. In the simplest form, interdependency may be sequential, where the output of oneprocess becomes the input of another. Next, in pooled interdependency, the outputs of anumber of subsystems become input into the final subsystem. Finally, in reciprocal inter-dependency, subsystems are constantly interacting with one another as inputs and outputsare constantly exchanged with one another. As the level of complexity of a product or pro-cess increases, components may become more numerous and separable, and linkages andinterfaces become more relevant.

In complex technological systems, competition among technologies need not progressin tidy episodic packages. That is, one may not find the neat linear evolutionary progres-sion that characterizes innovations in simple systems discussed in the technology cycleliterature. We argue that in complex technological systems, subsystems may evolve inde-


pendently. Additionally, the subsequent innovation in subsystems may amplify or suppressthe progression of the technological cycle and the emergence of a dominant design. Also,the evolution of the system may be a function of the nature of the linkages among thesubsystems (Henderson and Clark, 1990).

For example, in complex technological process ‘A’ comprising three subsystems sequen-tially linked (say, X, Y and Z); competence-destroying changes in one subsystem (say, in X)can allow the entry of new firms that use this innovation in combination with the other subsys-tems (i.e. X1, Y and Z). The evolution of the incumbent and new entrant firms is not just basedon the outcome of competition between the X and X1 technology regimes, but would also beinfluenced by innovations in Y and Z. These subsequent innovations in subsystems (Y and Z)may exacerbate rivalry among the competing population of firms and hasten the emergenceof a dominant organizational form. Or, it may also be that innovations in subsystems (Y andZ) can mitigate rivalry by having a benevolent effect on the competing populations. This maydelay or perhaps even prevent the emergence of dominant design. Thus, among competingcomplex technological systems, a continuous stream of innovations in different parts of thesubsystems may result what we call arequisite parity. That is, innovations in subsystemsmay reduce the gaps between the incumbent and new technological system and preventany one technological system to have an overwhelming and sustained advantage over therival.

We argue that the persistence of two distinct technologies to produce steel may be at-tributed to the complexity of the steel making process. Steel making can be conceivedas a complex technological system comprising two critical subsystems: the steel-meltingprocess and the steel shaping process. These processes are sequentially interdependent(Thompson, 1967). That is, the output of the steel-melting process, the molten metal, be-comes the input for the steel shaping process. Thus, the evolution of the total system,the steel making process, would be a function of the evolution of component subsys-tems, viz. melting and shaping. As described below, innovations in steel melting and steelshaping enabled the integrated and minimills to continuously improve their competitive-ness.

4.1.1. Innovation in melting: emergence of BOF and DRIThe basic oxygen furnace emerged in the 1950s as a more efficient steel-melting al-

ternative to the OHFs that were being widely used by integrated mills. It required lesslabour, melting time, and raw materials inputs. For example, while the OHF process took5–8 h to make 100–600 tonnes of steel; the BOF process only took 35–45 min to make400 tonnes of steel. Thus, the emergence of the BOF reduced the cost of steel manufac-tured by the integrated mills and thereby, increased their competitiveness compared to theminimills.

EAF use an almost 100% charge of ferrous scrap, thus, the competitiveness of the min-imills is a function of the availability of good quality scrap at low prices. The presenceof alloying elements such as zinc, copper, and lead reduce the quality of the scrap. Forexample, as automobile manufacturers move towards increased use of corrosion-resistantgalvanized steel, the presence of such alloying elements in ferrous scrap increases. Refin-ing such impure scrap increases the cost of producing steel through the minimill route. Thelack of supply of good quality ferrous scrap can drive up steel production and refining cost


for minimills and reduce their competitiveness. In places where steel scrap prices are highor scrap quality is poor, minimill competitiveness was improved by the development offurnaces that produced direct reduced iron (DRI). Presently, there are three processes usedto produce DRI, the Midrex process, HYL process and Fior process (Hogan, 1991). As theadvent of BOF improved the integrated mills competitiveness, furnaces that produce DRIhave allowed minimills to maintain their competitiveness.

4.1.2. Innovation in shaping: emergence of the continuous casting processBefore the introduction of the continuous casting process (CCP) in the late 1950s and

early 1960s, steel mills shaped steel by first pouring the molten metal into the ingots, whichwere then rolled or forged into the desired shape and size. The continuous casting processallowed the direct casting of molten metal into desired shapes. This approach thus bypassedseveral steps required in the production of the final shape from the ingots and therebyoffered considerable economic advantage over the ingot route of steel making. It reducedthe production cost of steel by increasing yields from 69 up to 79% and saving in energycosts.

With the advent of CCP, new steel plants could be set up without costly, ingot casting,re-heating, forging and rolling facilities. It reduced fixed capital investment by 25–40%,plant space required by over 35%, and energy costs by 30–75% (Rosegger, 1980). Thelower initial capital investment and the availability of complementary technology resultedin the growth of many new minimills (Rosenberg, 1983). As knowledge of the use of thetechnology increased through movement of personnel, inputs of suppliers and technol-ogy consultants, trade groups and publications, more minimills were established using theEAF/CCP combination. Thus, the emergence of the CCP increased the competitiveness andfounding of minimills.

As the integrated plants were mostly set up before the development of CCP, they shapedsteel in forging and rolling mills. Thus, the adoption of CCP was delayed in the integratedmills due to inertial tendencies inherent to incumbent large firms, the need to make changesto their plant layout, managerial fear of losing jobs and learn new routines to operate andmaintain the new technology (D’Costa, 1999; Hall, 1997). The share of steel producedthrough CCP in integrated mills increased from 20% in 1980 to 65% in 1989 (Hogan,1991). The installation of new CCP route within existing integrated mills have helped lowertheir cost of steel production.

Thus, innovations in melting and shaping such as, OHF, BOF, DRI and CCP have enabledthe rival technological systems (integrated and minimill) to improve their competitiveness(Hall, 1997). While, competing technologies may not achieve complete parity in termsof efficiency or other attributes such as quality, they may reach a level of parity that isrequisite enough to prevent the extinction of one. As such requisite parity is achieved,historic, economic and institutional factors (Scott, 1995)and ecological factors (Carroll,1985; Delacroix et al., 1989) may step in allowing the two groups to coexist, or delaycreative destruction. Thus we propose the following.

Proposition 1a. In competing complex technological systems, innovations in subsystemsmediate outcomes and delay the emergence of a clear winner.


4.1.3. Meta-technologiesWe note that two key innovations in the subsystems, the BOF and CCP technologies, had

a benevolent effect on both populations of firms. For instance, the greater efficiency of BOFcompared to the OHF it replaced enhanced the survival of integrated mills. Additionally,as the BOF consumed less ferrous scrap than the OHF (Cockerill, 1971), it reduced thedemand for scrap in the integrated mills, thereby freeing up the much needed resource forthe minimills. Similarly, the increased yields and reduced costs possible through the CCP notonly enhanced founding of minimills, but also improved the efficiency of integrated millsthus making them more competitive with minimills.5 Such technologies can be termedmeta-technologies.

Meta-technologies are innovations that can have a benevolent impact on two or morecompeting technological regimes. Meta-technologies enhance the survival probabilitiesof competing groups of firms using different technologies within an industry, thoughthe benevolent impact may be skewed and asymmetrical. Hence we have the followingproposition.

Proposition 1b. In competing complex technological systems, innovations in subsystemsthat have benevolent impact on the competing systems will delay the emergence of a clearwinner between those systems.

4.2. Ecological factors

The technology cycle model assumes that innovation occurs without resource partitioning(Carroll, 1985) and co-variation in environment (Delacroix et al., 1989). That is, the eco-logical environment does not change.Carroll (1985)uses resource partitioning to explaindifference in survival capabilities of generalist and specialist organizations. According toCarroll, competition among generalists to occupy the centre of the market frees up resourcespace for specialists in the periphery.Delacroix et al. (1989)show how differentiation inproduct markets reduced failure rates and competition for resources in the California wineindustry. Similarly, one can argue that variations in technologies matched by a correspond-ing variation or partitioning of product and factor markets may diffuse the competitivenessbetween competing technology regimes, allowing distinct technologies and organizationalforms to coexist.

In the steel industry, the emergence of BOF—an innovation in melting in the integratedmills—reduced the ferrous scrap requirement of the integrated mills (Cockerill, 1971, p. 26),thus creating a resource space for the minimills to grow and flourish.6 That is, the emergenceof BOF enhanced the resource partitioning between the integrated mills and minimills,diffusing the extent of competition among the firms using the two technologies in the factormarket. Additionally, later resource partitioning in product markets further reduced theextant competitive interaction among the integrated and minimills. The integrated millsfocused on hot and cold rolled sheets, plates, and welded pipes and tubes; meanwhile the

5 Nevertheless, adoption of CCP in integrated mills was suppressed because of the path dependencies createdby their investment in the ingot route of steel making.

6 Scrap comprises only 25–30% of BOF load as compared to 50% in the OHF (Cockerill, 1971).


minimills focused on structurals, concrete reinforcing bars, and round bars.7 Hence wedescribe the next proposition.

Proposition 2. In complex systems, innovations in subsystems that partition product andfactor markets, mitigate rivalry among competing regimes and delays emergence of clearwinners.

5. Selecting technologies to treat chronic kidney disease

Chronic kidney disease is a progressive disease that is likely initiated by prolonged hyper-tension or some other injury to the kidney cells (nephrons). Somewhat similar to atheroscle-rosis, once initiated, the disease will generally progress steadily toward its end-stage wherekidney failure is imminent. Particularly pernicious is the fact that chronic kidney diseasemay not produce severe symptoms until the disease has reached its end-stage, loosely de-fined as 10% of normal kidney function, when kidney failure is imminent (Brenner andRector, 2000).

Before the 1960s, little could be done for patients suffering from end-stage kidney disease.After 1960, essentially two main approaches emerged for the treatment of the disease inits end-stage, dialysis and renal transplantation (Schrier, 2001). Dialysis is a process thatsubstitutes for much, but not all of the diseased kidneys’ function. Kidney transplantationactually replaces the damaged kidneys with a new (donated) one. Both treatments hadactually been investigated for several decades but did not become feasible before the 1960s(Ahlstrom, 1996). These technologies treat the same disease and vie for many of the samepatients and medical resources (Ahlstrom, 1991). We describe these treatments and theirhistories further in the subsequent section.

5.1. Dialysis

Dialysis, the removal of toxic solutes outside the body through an artificial kidney ma-chine, is the most commonly used treatment in the United States. The focus is on using amachine that is capable of performing much of the kidney’s function. Although there is nodenying that dialysis saves lives, it has come under some criticism (Ahlstrom, 1991; Rettig,1991, 1995). It has been called a “halfway technology”, that is, dialysis does not cure kidneydisease, rather it eliminates bodily fluid waste and helps maintain blood chemistry, albeitimperfectly (Thomas, 1974). It is also an expensive treatment, costing about US$ 40,000annually per patient (USRDS, 1997).

The arrival of World War II in Europe yielded large numbers of patients with acute (sud-den) kidney failure, due to trauma or poisoning. This produced a pressing need to get thedialysis machine out of the laboratory where it had languished for over three decades. Inresponse to conditions in wartime Holland, Dr. Willem Kolff developed a rotating drumdialysis machine, and eventually his innovation proved quite useful in treating short-term

7 However, minimills have recently started entering into product lines, such as slabs and sheets, which wereexclusively produced by the larger integrated mills in the past (Christensen, 1997).


kidney failure (Kolff, 1965).8 While subsequent improvements led to the diffusion of dozensof machines around the US in the 1950s, many of them sat idle for lack of specially trainedstaff to operate them (McBride, 1979). Even the machines that were used had to be dedi-cated to short-term management of acute kidney failure, as it was not possible to dialyze thesame patient more than a few times. In the 1950s, there were no accepted alternative treat-ments for treating chronic end-stage kidney disease as renal transplantation was still in itsinfancy.

By the close of the decade, the stage was clearly set for the widespread application of dial-ysis if solutions could be devised to the problems associated with repeat dialyzing, as wellas the training of medical staff to apply the technique and monitor patients’ conditions.9 Aphysician, named Belding Scribner, championing dialysis emerged in 1960, and he was ableto supply solutions to the problems of repeat dialyzing and training for long-term care ofpatients suffering from chronic kidney disease. Dr. Scribner and an engineering colleagueinvented an arterial venous semi-permanent shunt that permitted the repeat dialyzing ofpatients suffering renal failure. This simple but ingenious innovation touched off the appli-cation of dialysis to kidney disease in the US. Although there was much early resistancewithin the organized nephrology community, Dr. Scribner became a tireless advocate ofhis innovation. He travelled around the US supplying dialysis kits and training teachinghosts of young nephrologists his technique while raising money to pay for the expensivetreatments when patients were unable to (Fox and Swazey, 1978).

The nephrology community’s initial response to the dialysis treatment possibility wasdecidedly mixed. There were fears that as the widespread application of dialysis wouldnecessarily be expensive, it would siphon away a great deal of money from the basic researchunderway to better understand kidney disease (Fox and Swazey, 1978; Bricker, 1991). In1963, a major conference was organized by academic nephrologists in Chicago to discussresearch on the treatment of kidney disease. Dr. Scribner was not invited so he respondedby organizing his own conference in the same city at the same time. It was attended mainlyby clinical nephrologists and had a turnout that was three times greater than that of the rivalresearch conference (Fox and Swazey, 1978).

The costs of dialysis treatments have always been high and Scribner frequently foundhimself hustling for funds to operate his dialysis centre. He claimed that dialysis couldsave many more lives if people could have access to the treatment. His avowed goal wasto provide that access. To achieve this, he worked on two fronts. First, he tried to reducethe treatment’s cost, in particular by exploring ways to make cheaper, home dialysis feasi-ble. Second, he sought government financial support. In this regard, in 1963 he convincedhis old employer, the Veterans Administration, to make dialysis available at VA hospitals(Fox and Swazey, 1978). Scribner (1990), recalling the importance of the VAs endorse-ment, noted that the agency’s nationwide facilities ensured broad visibility for dialysis.In 1965, the US Public Health Service also agreed to fund 12 dialysis facilities spreadaround the country. Reflecting this growing support, visibility, and favourable press for

8 All but one of Dr. Kolff’s first 15 patients died. Nevertheless, the dialysis machine was proclaimed a success(Weisse, 1984).

9 Dialysis patients require a great deal of monitoring to maintain sensitive electrolyte balance and blood chem-istry.


dialysis, increasing numbers of physicians either went to Seattle to learn the clinical as-pects of the treatment or were directly exposed to it through the VA or the new PHS clinics(Rettig, 1976).

Early research results of the efficacy of dialysis in its first decade were mixed, however.The expected life span for a patient undergoing dialysis then was about 2 years at that time,and there were difficult and unforeseen morbidity problems associated with the treatment(Fox and Swazey, 1978). These included bone loss, continuing uremic symptoms and ar-terial calcification so severe that patient autopsies revealed arteries that could withstand ahammer blow (Scribner, 1990). Furthermore, suicide rates for dialysis patients were some600% above the ordinary rate (Bernstein, 1990). Warnings continued to be expressed byleading medical opinion-makers, usually academic nephrologists, concerning these prob-lems as well as the increasing volume of resources being poured into dialysis treatments atthe expense of basic research into the disease’s underlying causes (Rettig, 1976; Fox andSwazey, 1978; Bricker, 1991). Nephrologists also feared that chronic kidney disease patientswould soon overwhelm teaching hospitals where dialysis was usually performed (Schreiner,1995). Yet clinical backers continued in their dogged efforts to get dialysis accepted andfunded. As the 1960s came to a close, dialysis faced a new problem: renal transplantation,which had foundered for years, was starting to become technologically feasible and wassoon widely perceived by the clinic community as a superior treatment alternative (Fox andSwazey, 1978).

5.2. Transplantation

Renal transplantation is the primary alternative to dialysis in the US Transplantation“cures” chronic kidney disease by replacing damaged kidneys.10 In practice, however, tech-nical problems and the body’s immune system continue to plague transplantation. Difficul-ties with immunosuppressive drugs and their side effects have proved particularly vexing totransplant surgeons and their patients (Werth, 1994). Like dialysis, transplantation is veryexpensive, cost estimates range from a low of US$ 50,000 to well over US$ 100,000 forone surgery and follow-up care (USRDS, 1997).

The first human-to-human kidney transplantation was reported in 1936 in the formerSoviet Union. The patient survived only 48 h and never regained kidney function. In 1954,transplantation between two identical twins was performed at Boston’s famed BrighamHospital. Rejection of the transplanted kidney, however, was the general rule. Early renalgrafts in the 1950s and 1960s were plagued with high morbidity and mortality and fewpatients survived more than a few months (Starzl, 1990).

The technology received a boost when immunosuppressive drugs were developed in1962. There was a very gradual increase of renal transplant centres over the followingyears. Dr. Thomas Starzl emerged as one early champion of transplantation treatments justas Dr. Scribner had championed dialysis. In 1964, he authored the first textbook devoted torenal transplantation and long remained at the forefront of the explosion of transplantationresearch that began at that time.

10 Though renal transplantation replaces lost kidney function, it does not cure the underlying reasons for thedisease.


The human immune system’s natural tendency to reject a foreign organ has continuedto be a problem for transplant surgeons. The immunosuppressive drugs in current use,Cyclosporine and Prograf, were introduced in the late 1970s and 1980s, respectively. Mucheffort has been directed towards finding ways to outsmart this natural rejection tendency.Immunosuppressants represent a very important area of current research. Partnerships withbiotechnology firms facilitate ongoing efforts, and the work is promising (Danovitch, 2001;Werth, 1994).

Although transplantation was generally regarded as being superior to dialysis, after adecade or more of clinical experience, both technologies found themselves aligned into asomewhat uneasy coexistence (Ahlstrom, 1996). As the 1960s drew to a close, the nephrol-ogy field had two maturing technologies from which to choose to treat end-stage kidneydisease, complete with different standards and methods, and accessible to much differentkinds of firms and physicians. Yet neither technology was able to creatively destroy theother. Competition was based less on innovation and more on socially constructed institu-tional processes (Ahlstrom, 1991; Ahlstrom and Garud, 1996). Although many physiciansthought transplantation was a superior technology, few were willing to argue that one shouldsupplant the other (Dunbar and Ahlstrom, 1995). Funding from insurance firms and gov-ernment was needed if the technologies were going to widely diffuse. The field realizedthat the two sides had to form a truce to establish the regulatory institutions needed to directresources their way (Rettig, 1991; Bricker, 1991).

6. Persistence of technologies in kidney disease treatment

6.1. Regulatory environment

The role of institutional factors in the persistence of technologies is particularly salientin the case of kidney disease treatment technologies. These can include regulatory factorsbased on government intervention (Scott, 1995). Normative factors that prescribe roles andcognitive forces that frame thinking and create taken-for-granted thought and behaviour canalso influence persistence (Powell, 1991; Scott, 1995). As the 1960s ended, the kidney fieldhad two technologies from which to choose to treat end-stage renal disease. There was muchinfighting among the field over where the limited research and treatment dollars should be.There was building momentum among renal clinicians that favoured government supportfor dialysis treatments (Fox and Swazey, 1978). They knew that support was unlikely tobe forthcoming, however, if the nephrology profession continued to be divided concerningthe long-term appropriateness of dialysis. Professionally speaking, this division started toresolve in 1967 when, despite their continuous misgivings, some critical opinion-makers de-cided to endorse the use of long-term or “maintenance” dialysis. The new endorsers includedDr. Neal Bricker, first president of the American Society of Nephrology and GeorgetownUniversity’s Dr. George Schreiner, a well-known nephrologist and an important Washingtoninsider (Rettig, 1991).

The well-publicized endorsements of these important nephrologists were very crucialevents as they represented the opinion leaders of the clinical and academic sides of thefield (Rettig, 1991). This eventually allowed dialysis to become more widely accepted


as an appropriate therapy and worthy of government funding. About the same time, theprofession made public policy statements that dialysis and transplantation could functionas complementary technologies and both sides started to work together more closely (Foxand Swazey, 1978). Dialysis would be used as a treatment until suitable kidneys were found,and if the transplant failed, patients could easily go back on dialysis. At least that was thepublic position, though many nephrologists harboured misgivings about calling dialysis astopgap and wondered about the other side’s true intent (Ahlstrom, 1996; Bricker, 1991;Rettig, 1995).

Public statements and modifications in physician training were one thing, but the profes-sion needed to work together to bring about needed institutional changes as well. The publicendorsements not only signalled the reunification of nephrology’s ranks but also allowedthe profession to bring more concentrated pressure to bear on the government to supportdialysis and its burgeoning clinical and research communities. These efforts culminatedin an amendment to the 1972 Social Security Act (Section 299I) that made dialysis andtransplantation generally available to sufferers of chronic kidney disease, most often at nocost to the patient (Fox and Swazey, 1978). The ESRD amendment is a unique institutionalarrangement in that end-stage renal disease is the only disease for which the US federalgovernment will fund treatment, regardless of the patient’s age or economic means. Pro-ponents estimated that the first year costs of the new ESRD program would be US$ 35–75million to the government; they were, in fact, US$ 240 million and subsequently increasedat a rate of nearly 20% annually for two decades (Fox and Swazey, 1978; USRDS, 1997).

Today, most physicians continue to agree that transplantation is a superior treatment todialysis; the feeling is that dialysis’s progress is limited by technological dead-ends andphysical limitations of the process. Yet, dialysis is the more dominant treatment in the USand Japan, while transplantation has more support in a number of European countries. Theongoing support for dialysis and transplantation largely irrespective of their high cost hasled to an, at times, uneasy coexistence that is stabilized by the institutional arrangement ofthe ESRD program and the extensive research funding available from the National Institutesof Health.

Several key people in the field have gone even further in arguing that the current (regu-latory) institutional arrangement has actually frozen the field in place such that dialysis hasbecome a “plumbing and pumping” field (Striker, 1995), while transplantation continuesto be hamstrung by numerous legal and technical challenges (Fox and Swazey, 1992; Fox,1995). Both technologies receive unequivocal support from the US government on the treat-ment side and hence are big moneymakers for all providers concerned (Fox and Swazey,1978, 1992; Dunbar and Ahlstrom, 1995).11 Thus, we propose the third proposition.

Proposition 3. Regulatory regimes can influence the interaction among competing tech-nologies, preventing the emergence of clear winners or the exit of losers.

11 The effect of financial incentives is not entirely clear. Although most physicians would disagree that incentiveshave anything to do with which treatments are selected, it is likely that financial incentives have played some rolein treatment selection (Dunbar and Ahlstrom, 1995). Yet even before there were financial incentives—before thepassage of the ESRD program in 1972—the renal field was able to compromise and find a way for the subspecialtiesto coexist.


6.2. Assessment issues

In terms of cognitive institutional aspects, challenges in comparatively evaluating thetechnologies due to problems of assessment criteria have further hindered any movementtoward selecting one technology or the other in this field (Garud and Ahlstrom, 1997b;Scott, 1995). There are a number of facets of the technologies that can be assessed, anddifferent aspects of the treatments can evolve independently of one another. As such, theassessment question has become quite murky in trying to include numerous criteria rangingfrom quality of life to cost, to ease of application and training of personnel and patientpreference (Fox and Swazey, 1978, 1992; Starzl, 1992; Starzl et al., 1995).

The kidney field has fought a number of pitched battles over how different therapiesshould be assessed, and arcane matters such as assessment details for new drug or medicaltechnology can spell the difference between success and failure for a treatment in themarketplace (Garud and Ahlstrom, 1997b; Garud and Rappa, 1994; Starzl et al., 1995;Werth, 1990, 1994). Indeed seemingly small changes in assessment such as how evaluationroutines are conducted can create a large change in if the technology is judged a success orfailure (Garud and Ahlstrom, 1997b). In the medical field, the results of studies, which canbe significantly influenced by the assessment approach (Dunbar and Ahlstrom, 1995) canlead to much different outcomes in terms of which technologies are accepted into medicalpractice and which fall into neglect (Ahlstrom, 1996).

These assessment battles have even been extended into the arena of research methodologyand testing protocol (Starzl et al., 1995). Until technology assessment regulations have beensettled, the evaluation of these (and other) technologies will continue to be a source ofcontroversy and continue to make the selection of the most suitable technology for chronickidney disease (and many illnesses) challenging (Werth, 1990; Fuchs and Garber, 1990;Angell, 1990, 1996; Starzl et al., 1995).12 Hence it is proposed.

Proposition 4. An increase in the fuzziness of(technology) assessment criteria delaysemergence of clear winners.

7. Implications and directions for future research

This article has contended that while the technology cycle literature is useful in de-picting the battle between technology regimes in simpler technological systems; complex,multifaceted technological systems may have evolutionary trajectories that emerge out ofa confluence of innovation in subsystems and institutions (cf.Lynn et al., 1997; Powell,1991). We identified three factors that can delay the creative destruction process in thesesystems: complexity of the technology, the institutional and ecological dynamics surround-ing the competitive interaction among the technology regimes. The findings of this studyhave implications for managerial practice and technology, organizational and strategy re-searchers.

12 Some would argue that controversy in technology assessment is essential part of the process (Rip, 1987). Recentcontroversies in nephrology have surrounded the introduction of new techniques and muddied the treatment waters.


7.1. Implications

The study suggests that managers making technology investment decisions need to morecompletely understand the competing technologies, and the institutional and ecologicaldynamics surrounding the technologies. The emergence of an alternative and potentiallysuperior technology does not necessarily mean the impending demise of the incumbent.For example, managers may find that innovation in subsystems in complex incumbenttechnologies may allow its persistence over a longer time frame. Or, managers may findthat developing meta-technologies as described inProposition 1b, may allow the incumbenttechnology to overcome some of the advantages of the alternative technology. If Apple, forinstance, had developed a meta-technology that allowed users to run Windows programs onApple machines, or Apple files on Windows machines, very early on, it may have been ableto prevent the dominance of Windows. With a broader base for Apple compatible products,Apple would have likely been able to take advantage of network efforts and increasingreturns (Arthur, 1996; Carlton, 1997) that Microsoft instead enjoyed.13

Managers may find that the institutional setting, power structure, measurement and as-sessment criteria of their industry all blur the difference among competing technologies.This helps to explain why so-called “good enough” technologies may win, and what alsomay be needed to tip a system toward a certain standard so as to give that version an ad-vantage (Evans and Wurster, 2000). The uncertainty of the technology evolution processalso suggests that managers need to look inward and outward to increase the likelihoodof their firm surviving the technology battles. Managers may find that they have to placebets in a real options sense, while keeping in mind the institutions and environment theyface. Managers also need to look inward to identify the competencies they need (Hitt, 2000;Fowler et al., 2000) to ensure they have the absorptive capacity (Cohen and Levinthal, 1990)to adopt new technologies and respond quickly to technological changes.

7.2. Future research directions

This article should also direct researchers and policy makers to investigate the technologycycle process in greater depth at the technology, organizational and strategic level. The eraof ferment remains the other “black box” in technology research. We have identified threefactors that may extend the ferment process, however, future research can identify additionalcases and boundary conditions that extend (or shorten) the ferment process. Such researchmay help us develop a more complex model of the technology evolution process. Such amodel may also be useful to organizational theorists interested in the impact of technologychange on organizations. A better understanding of technology cycles may contribute totheories of organization evolution (Barnett, 1990; Baum et al., 1995).

For example, organizational ecologists may find that our model of technology persistenceis helpful in understanding the emergence of new organizational forms and diversity of or-ganizational forms found in many settings. A better understanding of technology changeprocess may also contribute to strategy research. Our research on technology cycle clearly

13 In the mid-1980s, Apple actually rejected an operating system developed by Digital Research called “Gem”that would have made IBM-compatible machines look like Macintoshes and run Mac software (Carlton, 1997).


has implications for research on technology adoptions and investing in emerging technolo-gies. Much past research holds that the resulting shakeouts from a period or technologicalferment are stochastic in nature (Arthur, 1989), and heavily dependent upon chance events(David, 1985; Arthur, 1996). While not taking issue with this, we argue that these eventsmay be less dependent on chance than is commonly accepted.

Firms may have more ability to shape competition over competing technologies, partic-ularly by working to shape underlying institutions such as technological standards, whichcan strongly influence the paths taken by the system as a whole (Shapiro and Varian, 1999).Strategies surrounding the establishment and propagation of technological standards are in-creasingly crucial to understanding competition, and how to better regulate (or deregulate)product markets (Hamel and Prahalad, 1994; Shapiro and Varian, 1999).

Future research could more carefully examine technological systems in their entirety, par-ticularly considering the respective institutional environment and how firms and individualsaffect that environment (Garud and Jain, 1996). There are concrete underlying processesthat can lead to the success or failure of a technology. Assessment routines, for example,can play a major role in determining which technologies win, depending on the institu-tional environment (Garud and Ahlstrom, 1997b). Longitudinal case-based research on theevolution and competition of technologies and technological regimes can help to generatepractical and generalizable findings concerning the coexistence of technologies.

8. Conclusion

Our findings broadly agree with, and extend the work ofRosenkopf and Tushman (1994)that technology cycle models are appropriate to study simple systems. As the complexityof any technological system increases, the evolutionary process following innovation inany part of the system becomes more complex and considerably messier (Tushman andMurmann, 1998).

Thus, while products and subsystems may display a process of evolution, revolution,maturation destruction and replacement, the system in its entirety may show a remarkablepersistence (Christensen, 1992). This persistence is made possible by the fact that localevolution of subsystems may allow the complex entity to achieve the requisite parity requiredfor survival. Thus, in complex systems, rather than Schumpeterian creative destructionwe may notice the creative persistence of technologies and a coexistence of competitivetechnological systems. The battle between the IBM PC and Apple operating systems, whereevolution and competitive dynamics were not determined by the battle in the operatingsystem domain alone, but was also influenced by numerous innovations in complementarytechnology such as computer hardware, and applications, and now even the design of the box.Further, in complex systems, this article identified innovations called meta-technologies,which increase survival of competing technologies by the benevolent effect they have onthem. For example, in the personal computer industry, software that allowed conversion offiles between MAC and the Windows systems could have helped to enhance the survival ofboth technologies.

Additionally, this article has noted that ecological dynamics might allow disparate tech-nologies to coexist. It was observed how co-variation in factor and product environments in


the steel industry diffused competition among integrated and minimills. Finally, institutionalfactors were identified that allow coexistence of competing technologies. For example, thedialysis and transplantation treatment regimes represent technological systems that have anumber of different subsystems that have evolved at different rates and have made assess-ment fraught with difficulties (Ahlstrom and Garud, 1996). While they are close substitutesand were in keen competition in the past, today these treatments coexist, in spite of stronglyheld opinions about which one is superior (Ahlstrom, 1991; Fox and Swazey, 1978, 1992;Fox, 1995). This is due in part to the organizations and professional fields that support thetechnologies, the research programs associated with each one, and the institutionalized pay-ment systems in the countries that support continued use of both treatment technologies. Inparticular, regulatory and cognitive institutional forces and restricting technology choicesimpact the field’s selections (Ahlstrom and Garud, 1996).

We conclude by observing that investigation of other industries that are characterized bytechnological pluralism and multifaceted technological systems would help us understandwhen and how disparate technologies can coexist. It will help us get a better calibration ofthe gales of creative destruction sweeping through technological landscapes.

Acknowledgements

Thanks to Raghu Garud, Mike Tushman, Shige Makino and Steven White for their helpfulcomments and discussions on earlier versions of this paper. This research was supported inpart by The Chinese University of Hong Kong Research Grants Council of the Hong KongSpecial Administrative Region (Project no. CUHK4047/99H).

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