Technological Trajectories and Industry Evolution: The case of the Telecom Switching Industry.

Arianna Martinelli

Eindhoven University of Technology

a.martinelli@tm.tue.nl

In this paper, we explore the relation between technological change and firms' competitive position in the telecom switching industry.  

The industry considered provides an interesting case because telecom switches are complex devices whose development encompasses numerous phases (from proof of concepts to the actual production) and expensive R&D, and also because in the last decades it experienced numerous technological discontinuities.

Following an emerging strand of literature we use USPTO patent data (issued between 1924 and 2003) and network analysis in order to distinguish the main technological trajectories corresponding to different generations of telephone switches in the relevant time frame. The analysis of these trajectories includes the identification of key patents, their assignees and the reconstruction of their engineering and economic context. Besides mapping of the technological development in the industry we show how technological change affect firms' innovative strategy. In fact, theory has pointed out the local nature of technological change, meaning that firms can explore only a limited portion of the existing search space. Furthermore, firms, depending on their position in the industry, have different technological preferences. The patent citation network encompasses the time dimension; therefore its connectivity structure analysis (i.e. the evolution of citations structure over time) can be interpreted as a dynamic extension of the firm's patent portfolio analysis.

The methodology proposed provides a valid method for describing and analyzing technological change in the considered industry. In particular, it highlights specific characteristics of the industry knowledge base and search process, characterized by a wide search space, coupled with harsh selection. The analysis at firm level points to the presence of differences in technological choices between incumbents and new entrants. Furthermore, firms reveal heterogeneous technological performances not coupled with actual market performance (i.e. firm's survival) showing that technological advantage does not secure survival.