Google and Apple’s Gale of Creative Destruction.

Walton, Nigel and Oestreicher, Klaus (2012) Google and Apple’s Gale of Creative Destruction. China-USA Buisness Review, 11 (11). pp. 1478-1491. ISSN 1537-1514

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Abstract

Creative destruction is an economic theory of innovation popularised by Austrian economist Joseph Schumpeter. In
this paper, Schumpeter’s theories are used to explain how radical technological innovations in
information-intensive industries are influencing the erosion of traditional industry and market boundaries leading to
the emergence of new competitive business models and strategies. Developments in digital technology has resulted
in new technological shifts and market linkages resulting in dilemmas for the existing incumbents in traditional
industries who find themselves increasingly trapped and victims of a new innovation logic. The new value
innovation logic is being driven by entrepreneurs such as Page and Brin (Google) and Jobs (Apple) who are
currently in the process of revolutionising the economic structures of many industries and creating new markets and
organisational business models in a gale of creative destruction reminiscent of the theories developed by Sombart
and Schumpeter. This creation of new market models and their impact on established industries are explained
further in the value chain evolution theory and its corollary sustaining innovation classification-scheme. These
theories reinforce the view that innovators, thinking in new and radical ways, provide sustainable new market
developments and earn above the average revenues compared to incumbents, whose profit pools have eroded. This
paper researches and analyses the impact that Google and Apple are having upon a broad range of
information-intensive industries and the strategic options of the incumbent firms in the respective traditional
industries in response to this radical change. Its purpose is to provide explanations of why and how radical
innovators are able to redefine the rules of the market leading to economic growth and development.
Keywords: creative destruction, prosumer, monetize, incumbents, institutionalization

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