The Mechanisms that Drive Disruptive Innovation

Disruptive innovation as a theory lacks concrete definition and is often misinterpreted in the literature. Previous studies dealing with the phenomenon largely focus on the process of market disruption and the factors that drive the process. However, little research exists that seeks to quantitatively validate existing theory. In response to these problems, we develop a market growth model that is capable of analysing multiple market segments and innovations. Building on existing models of consumer choice and innovation diffusion, we develop a utility-based model that considers the effects of preference structure, demand structure, and development dynamics on market disruption. The model is simulated using data on worldwide shipments of hard disk drives (HDD) across four market segments, namely: mainframe, minicomputer, desktop computer, and portable computer markets.
Results show that the proposed model is capable of estimating successive waves of disruptive technological innovation experienced in the HDD industry. Furthermore, qualitative analysis of differing preference structures, demand structures, and development dynamics provide significant insights into how the process occurs. We find that the distance between market segment preferences, the magnitude of optimal demand, and growth rates in technological improvement and absorptive capacity directly influence the speed and likelihood of market disruption. Findings suggest that disruption is not always absolute. Disruptive and disrupted innovations can coexist in the market under certain conditions. Thus, the structure of the market and competition determine the diffusion behaviours of disruptive innovations.