TECHNOLOGICAL INNOVATION AS A GATEWAY TO ENTRY - THE CASE OF THE TELECOMMUNICATIONS EQUIPMENT INDUSTRY

This study first reviews the concept of entry barriers in the economics and strategic management literature and investment in innovation as a particular kind of barrier to entry. An argument is then presented that one can also view, from the perspective of the entrant, innovation as a gateway into a changing industry. Data from the telecommunications equipment industry during the period 1975-86 support this argument. These findings suggest that the traditional, steady-state assumptions underlying the industrial organization paradigm, and the recently developed strategy typologies based on this paradigm, may be inappropriate in industries experiencing fundamental technological changes. In such cases, strategies designed to take advantage of change may be more fruitful.