Startups aren’t disrupting industries like they used to – Quartz

In the 1990s, researchers at business schools became fascinated with the question of why so many large, seemingly dominant companies were being supplanted by startups. The incumbents had more money, more staff, and more know-how—what were they doing wrong?

The most famous answer to this question came in the form of a theory from Clayton Christensen, a Harvard Business School professor who called his concept “disruptive innovation.” The moniker of “disruption,” derived from his idea, took on a life of its own. Though Christensen meant something more specific, disruption came to describe the risk that incumbents would be felled by younger, nimbler competitors.

That risk has faded over the last 20 years. Since about the year 2000, disruption, or what the economist Joseph Schumpeter called “creative destruction,” has become less and less common in the US economy, according to a recent working paper by researchers at the Boston University School of Law.

To study disruption, the researchers analyzed the chance that one of the top four firms in an industry would fall out of the top four the next year. They found that this “displacement” rate increased in the 1990s but has declined since 2000, suggesting that for the past two decades the risk that leading firms would get disrupted has been falling.

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Top-four firms are defined by total sales; industries are defined using six-digit NAICS codes.

The paper, which adds to a growing body of research documenting declining Source…

Author: Pitching Startup on Review