Abstract

This paper explores the trajectories of three key technologies in Formula 1 racing at the component, firm and system levels of analysis. The purpose is to gain an understanding of the evolutionary forces that contribute to the emergence and survival of dominant designs. Based on archival data and contemporaneous accounts of the period 1967-1982, we develop a series of propositions specifying the evolutionary forces acting on technological trajectories within each level of analysis. The resulting framework leads to a set of predictions about relationships between technological transparency, co-evolution, and the emergence of dominant designs. Specifically, we argue that when the costs and difficulty associated with transferring component knowledge between firms is low (technological transparency is high), technologies tend to co-evolve across firms, leading to the development of complementary technologies and increasing the likelihood of industry dominance. Where transparency is low, however, technologies tend to co-evolve across functions within firms, leading to the development of competing technologies across firms, increasing the likelihood of a technology's dominance within the firm. The data and argument suggest that the forces acting on these two types of technological trajectories are self-reinforcing, so that as momentum builds behind a trajectory, it becomes more likely that its evolutionary path will end in either firm- or system-level dominance.

Descriptors: technology, trajectories, evolution, competition

Introduction

The centrality of technological innovation to economic development has meant that it provides an enduring basis for research and debate. Work in this area has developed from the economic principles of the production function (Abramovitz 1956; Solow 1957) to consideration of managerial processes (Bums and Stalker 1961), and more recently, to connect innovative processes within the firm to the competitive dynamics within industries. Research has focused on the concept of competitive strategy (Porter 1983; Abernathy and Clark 1985), dynamic capability (Teece et al. 1997), institutions (Nelson and Winter 1977) and co-evolution (Levinthal 1992; Van de Ven and Garud 1994; Lewin and Volberda 1999). Studies have considered the relationship between incumbents and new entrants (Christensen and Rosenbloom 1995), the relationship between innovators and followers (Lieberman and Montgomery 1988), the distinction between radical and incremental innovation (Banbury and Mitchell 1995; Dewar and Dutton 1986) and the implicatio ns of competing organizations sharing technologies (Abrahamson and Rosenkopf 1993; Garud and Kumaraswamy 1993; Wade 1995; Cohen et al. 2000).

All these are important aspects of competitive dynamics and technological innovation. However, they raise questions about: (1) how evolution differs at relevant levels of analysis (technologies, firms, industries) and (2) how co-evolutionary forces within or between these levels affect the survival and dominance of technologies. These questions lie at the heart of the relationship between technological innovation, competitive strategy and firm performance. They are challenging, however, because answering them implies complex theory and a rich set of empirical observations. As one approach to this task, we employ an inductive, theory-building method that draws on archival data and contemporaneous accounts. Using Rosenkopf and Nerkar's (1999) definition of analytical levels and Dosi's (1982) notion of technological trajectory as theoretical lenses, we evaluate technology developments over fifteen years of Formula 1 racing.

Enfolding theory with data leads to a set of propositions on the evolutionary forces acting on technological trajectories within each level of analysis. The resulting framework informs the relationships between technological transparency, co-evolution, and the emergence of dominant designs. Specifically, we argue that when the costs and difficulty associated with transferring component knowledge between firms is low (technological transparency is high), technologies tend to co-evolve across firms, leading to complementary technologies. This increases the likelihood of industry dominance. When transparency is low, however, technologies tend to co-evolve across functions within firms, leading to competing technologies across firms and increasing the likelihood of a technology's dominance within the firm. Moreover, the data and argument suggest that the forces acting on these two technological trajectories are self-reinforcing, so that as momentum builds behind a trajectory, it becomes more likely that its evolu tionary path will end in either firm- or system-level dominance. In the discussion that follows, we trace the implications of the model for theories of competition in technologically intensive environments.

Theoretical Background

In prior research, the role of technology in competition was studied from at least three levels of analysis, focusing on technology itself (Dewar and Dutton 1986), on firms (Teece et al. 1997) or on the industry (Abrahamson and Rosenkopf 1993). Evolutionary theory is concerned with explaining processes where there are multiple units (individuals, firms, species, etc.) interacting with an environment (Levinthal 1992). Consistent with this perspective, Rosenkopf and Nekar (1999) propose three levels of analysis within which technological evolution can be observed (Figure 1). First, at the system level, a community of organizations can be defined. Here, interactions between firms lead to the development of industry-wide standards and the co-ordination of products. At this level, the evolution of technology may be influenced by institutional forces (Rosenkopf and Tushman 1994) and competitive rivalry (Porter 1980). Second, the community of actors within an organization defines the firm level of analysis. At this level, interactions between individuals and sub-units, lead to the integration of technologies to produce products or services (Grant 1996b). Technological evolution at this level is likely to be influenced by the boundedly rational decisions of managers (Levinthal and March 1981) and by the structure and culture of the hierarchy (Conner and Prahalad 1996). At the third level of analysis, component-specific communities external to the firm can be identified. Within this level, interactions among individuals and groups focus on the development of ideas and lead to the creation of the core knowledge (scientific basis) that forms the foundation of the product (Henderson and Clark 1990; Tushman and Murmann 1998).

Rosenkopf and Nerkar (1999) stress the importance of co-evolutionary effects both within and across levels of the hierarchy. This concerns the inter-relationships between change at the component, firm and system levels of analysis. Thus, for example, incremental evolution of technology within the firm may be associated with punctuated evolution at the system level (Rosenkopf and Nerkar 1999). Co-evolution may also be observed within a given level, as when complementary technologies co-evolve within firms or systems, for example. This multiple-level, co-evolutionary view highlights historically dependent relationships among the experiences that comprise the development of technology in a competitive context.

The meta-level concept of 'technological trajectory' (Dosi 1982) offers a way to conceptualize the flow of such developments. Trajectories describe the path of a moving object across space and time. Technological trajectories, therefore, may be defined as the series of path dependent experiences that track with the evolution of a technology (Dierickx and Cool 1989). We propose technological trajectories as the thread connecting one experience to another within and across levels of analysis. Building on Dosi (1982), one can discern three key attributes of such trajectories -- their power, momentum and degree of uncertainty.