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  • Cited by 3
  • Print publication year: 2001
  • Online publication date: June 2012

1 - A Taxonomy of Dynamic Competition Theories


Exactly what is dynamic competition, anyway?

Scholars offer a number of answers to that question, and there is no consensus on which theory of dynamic competition is the most accurate or useful. To underscore the diverse intellectual currents that flow through this volume, our initial chapter offers short synopses of the principal dynamic theories of competition.

By far the most prominent dynamic theory of competition is associated with Joseph Schumpeter. Although Schumpeter did not deny that real-world markets can resemble the perfectly competitive model, he argued that the most significant advances in human well-being come from forms of competition that involve new products, new technologies, new sources of supply, and new forms of business organization.

In addition to Schumpeter, other scholars have also developed dynamic theories of competition. “Evolutionary” competition theorists are perhaps Schumpeter's best-known modern descendants. Some of Schumpeter's fellow Austrian economists developed complementary theories that emphasize competition as a process for the discovery of new knowledge. More recently, the interaction of competition and technological change has prompted interest in theories of path dependence, in which small variations in initial conditions can lead to large and unpredictable changes in the market's evolution. Finally – and less well known in the economics profession – are strategic management theories that explicitly view competition as a dynamic process.