Home Computer Science Technological Entrepreneurship: Technology-Driven vs Market-Driven Innovation
An Alternative Perspective
Academic theories are rarely without their critics, and such is the case with entrepreneurship. Israel Kirzner (1973) rejected Schumpeter’s proposition that entrepreneurs develop new propositions without initial reference to the influence of market forces. Kirzner’s viewpoint is that entrepreneurs are engaged in moving resources from areas of low productivity to a different area where profitability has the potential to be much higher. The catalyst for such action is the entrepreneur’s profit motive and being alert to new market opportunities which can be exploited through some form of innovation in relation to a product, service or industrial process. Schumpeter, by contrast, did not see entrepreneurship as a demand-driven process, but rather as forcing changes in output mix and consumer tastes.
Available evidence seems to indicate that Schumpeter’s and Kirzner’s perspectives are equally valid. This perspective can be seen in the distinction made between technology-driven and market-driven entrepreneurship (Habtay 2012). Technology-push entrepreneurship occurs where scientific breakthroughs and R&D experimentation precede market opportunity analysis and the development of a viable business proposition. In contrast, market-driven entrepreneurship begins with customers creating demand pressure, permitting the identification of new market opportunities as the basis for the innovation that precedes a firm’s likely investment in product or service development activities. This form of entrepreneurial change typically emerges when a market originally created as the result of disruptive technological entrepreneurship has matured, and market-driven entrepreneurship based around a revised business model becomes a more likely strategy for sustaining a firm’s ongoing success (Moore 2004).
Habtay proposed that the start point for market-driven entrepreneurship is the discovery of viable new customer value propositions. The second component is the identification of a viable customer segment. The third dimension is a market structure that permits the creation of a business model consisting of a system of interdependent activities enabling the focal firm to effectively exploit the identified market opportunity. The fourth element is the identification of a strategy which provides a sustainable advantage over the competition. Hence successful business model innovation is customer-centric. Nevertheless the exact nature of the customer value proposition may not be identified in advance of market launch, but instead evolves over time as the firm gains greater understanding of potential customer needs (McGrath 2010).
Fig. 1.1 A comparison of entrepreneurial processes
As illustrated in Fig. 1.1, in the case of technology-driven entrepreneurship it is new scientific or technological knowledge which results in a push for development, eventually leading to a commercially viable outcome. Market opportunity entrepreneurship can be considered as a pull-directed process because recognition of potential customer need is the catalyst which prompts the development activity. It should be recognised, however, that in responding to market pull, exploitation of new scientific or technological knowledge may be required to create a viable commercial solution.
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