Disruptive innovation, managerial cognition, and technology competition outcomes

- We cross the research fields on disruptive innovation and managerial cognition.
- We explore how beliefs about customer needs affect incumbents' market choices.
- Beliefs about traditional markets prevent incumbents from identifying new markets.
- We define the 'social' market and the 'esteem' market.
- Incumbents unable to select the rising esteem/social markets are likely to decline.

In this paper we explore why incumbent firms fail to identify new markets in the face of disruptive technologies. We cross research on disruptive innovation with research on managerial cognition and we focus on the role of managerial beliefs about customer needs in directing the search for new markets and product features. We show that a primary reason why incumbents lose their leadership is the inability to recognize either the rising 'social' market, where customers use products for fulfilling their need for friendship, or the 'esteem' market, where customers use products for fulfilling their need for achievement. We then apply our emerging conceptual framework to the case of the smartphone industry and the ongoing rivalry among operating systems. We thus try to advance the disruptive innovation theory with regard to both the explanation and the anticipation of technology competition outcomes.