Sailing Ship Effect

MGMT002: Technology & World Change ————————————————- AY 2009-2010, Term 2 Student Paper Review, Howells (2002) The response of old technology incumbents to technological competition – Does the sailing ship effect exist? Prepared for: Dr Terence Fan Prepared by: Nicole Isabella Aw Su Sien (G14) Howells presents the audience with a critical view of the ‘sailing ship effect’ and postulates that it is triggered by misinterpretations based on insufficient knowledge, and that the mere existence of this effect is rare.

This ‘sailing ship effect’ is the process whereby the advent of a new technology engenders a response aimed at improving the incumbent technology. I am inclined to Howells’ view and will further demonstrate this below. There is evidence to believe that the sailing ship effect is existent in the world today. Cooper and Schendel (1988) considered 7 different cases and I would like to focus on the case between vacuum tubes and the transistor.

A simple timeline of the development of the vacuum tubes has shown that the old technology (vacuum tubes) continued to be improved and reached its highest stage of technical development only after the new technology (transistor) was introduced. Nonetheless, there is still insufficient evidence to definitely conclude that the sailing ship effect did take place. The sailing ship effect is challenged due to the number of externalities involved in the technological development of any product, making it difficult to conclude that accelerated improvements made by incumbent technology is driven solely by the emergence of new ones.

Granted, there is a timely connection between the arrival of new technologies and the accelerated improvement of old ones, however, one must question the genuine motivation for this action (government funding, ‘normal’ intra-industry competition, lock-in effect or arrival of new technology). The Flettner rotor ship, for example, was a ‘government-inspired’ project. Research and Development (R&D) is essential in the improvement of any technology.

The availability of funds is a problem many firms face, however, with high barriers to entry coupled by financial support from the government, it is not difficult to understand how this could provide the impetus for accelerated improvement of a technology as a firm would want to gain monopoly in the industry. In the Alkali industry, the Claus-Chance process was already in the works before the threat of the Leblanc process.

This shows that even without the presence of new technologies, accelerated improvements are still being made. I believe that the extent of the sailing ship effect can also be related to the substitutability of the old and new technologies. The more substitutable the new technology is, the greater need to invest in the improvement of the old technology to maintain competitiveness in the market (assuming the firm does not exit the industry or switch from old to new technology).

This could be a factor, which allows the coexistence of both old and new technology. The advancement of cameras today illustrates the aforementioned idea. Despite the technological advancement of cameras (from film to digital), digital cameras and film cameras still coexist in the market because of their relatively low substitutability (as film photography is different from that of digital photography).

It would be fallacious to argue that the lack of evidence of the sailing ship effect would mean that it is non-existent. Therefore, I do not believe that this effect is non-existent but support Howells’ viewpoint on the rarity of the sailing ship effect because it is too superficial to claim that the advent of new technologies provided the main driving force for the accelerated improvement of old technologies.

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