TECHNOLOGICAL CHARACTERISTICS OF

COMPETITIVE DOMAINS
(1) Technological opportunity

Technological opportunity refers to the degree to which innovation potential exists in an industry so that innovation may be
possible in form of new products, new services or new processes. However, the opportunity for developing competitive
advantage will differ from one competitive domain to another in terms of windows of opportunity provided by technology.

For instance a significant competitive advantage for a pharmaceutical company may derive from breakthrough drugs that
require significant outlays of R&D expenses whereas the process innovations leading to cost reductions may lie at the
heart of successful competition in the case of many commodity chemicals. The windows of opportunity can be judged
attractive by technical feasibility of innovation and by the extent to which they can serve market needs.

Technological opportunity is not however a guarantor of competitive advantage. The exploitation and regeneration of
technological opportunity is the result of interplay between intentional incremental and radical innovations and
unintentionally made discoveries.

(2) Appropriability

This refers to the degree to which the potential economic benefits from an innovation can be appropriated by the firms
engaged in technology development. Where appropriability is high, firms can reap the benefits of their innovation. In low
appropriability, the profit potential of innovation is dissipated through imitation by other firms or ceded to suppliers,
distribution channels or customers. When patents are obtained in the pharmaceutical industry, the developing firms reap
the benefits of innovation. The more proprietary the innovation, the greater will be the competitive advantage provided to
the firm. The ability of a firm to protect these intellectual property rights is then key to its ability to appropriate long term
benefits from the technology such as in firms involved in bio-technology. However, if other firms are able to copy
(‘engineer around’ in Narayanan’s terms) these patents, the patent provides little long term appropriability. This is evident
in software technology where the innovation could be easily duplicated or imitated.

(3) Resource requirements

Competitive domains differ in the magnitude of resource commitments required to bring about an innovation.  The
resource requirement is high when fundamental research is required in those domains. Where product development is the
key focus, resource commitments may not be so large. Broadly the more the basic requirements of basic research, the
more resource commitments are required to produce an innovation.

(4) Collateral assets

The need and availability of collateral assets for an innovation to yield a firm competitive advantage is important to gain
competitive advantage.

 
(5) Institutional milieu

In many competitive domains, technology based rivalry gets enacted not merely in the marketplace but in the institutions
that are linked to the technology as well. Broadly, there are three sets of institutional players.

Market participants, such as suppliers and distributors. non-market institutions such as standard setting organizations and
governmental agencies. enabling institutions such as industry and trade   associations, scientific and technical
associations, data   sources such as influential trade journals etc. The actions in the institutional arena are significant
enablers of the pursuit of competitive advantage.

(6) Speed

Competitive domains also differ in terms of the speed of execution they demand of competing firms. Speed refers to the
velocity of change in a competitive domain that sets the pace of internal operations of the competing firms. Due to time
compression in the context of modern dynamic technology business, the speed in innovation has become a significant
characteristic in order to stay in competition.