Introduction and Overview

All too often, practitioners, pundits, and academics take a pessimistic view of the value and longevity of today's technologies. We all fall in love with new, apparently “disruptive” technologies, like Linux or on-line music distribution, and preach the death of established organizations and existing capabilities. However, the reality is often different and more subtle: The old mantra of “creative destruction” seldom applies in a holistic fashion. Old technologies and capabilities rarely disappear – they instead evolve and become the building blocks of tomorrow's innovations. They provide crucial, enduring value to established firms, new entrepreneurs, and consumers alike. This simple realization has crucial implications for managers and policy makers.

This chapter takes a new look at the innovation life cycle and its implications for competition and public policy. It draws from existing literature, case studies, and product innovation data to illustrate the workings of technological “assimilation,” namely, how technological innovations that were once marketed as individual products become integrated into broader platforms, which in turn provide the building blocks of further innovation. As we will illustrate through our examples, assimilation can take various forms and impact various levels of integration, such as the incorporation of capabilities into a new distribution platform, the licensing of complementary capabilities, and, in some cases, acquisitions of entire companies with complementary products or technology assets.