Shift in Value Creation: Competence-destroying Discontinuity on Complementary Assets

Literature on discontinuous technological change has highlighted the strategic implications of value creation and value appropriation for incumbent firms and new entrants. This paper contributes to this literature by developing a model of technological change in the newspaper industry. The technological discontinuity that occurred in this industry enhances the distinctive competences of incumbent firms, but revolutionizes the complementary assets of production and distribution. Consistent with the literature, our model highlights how the discontinuity in complementary assets impacts the value appropriation process – i.e., shifting value towards the owners of the new assets. However, our in-depth analysis also highlights a shift in value creation. We claim that if the discontinuous change transforms the assets from specialized to generic, it produces a shift in the value creation process so that new entrants able to orchestrate distinctive competences are in a better position than incumbent firms focusing ...