Networks of breakthrough technologies and their use in strategic games for competitive advantage

Abstract

Breakthrough technologies sustain competitive advantage and are seen as the engine of growth. These technologies can be developed by leveraging internal know-how, but more often they come from an infusion of external technology. The task of screening and selecting innovative technologies to develop or acquire is challenging and relies on various underlying assumptions. This research proposes a systematic framework of analysis that combines network theory and game theory concepts to analyze a set of breakthrough technologies and the companies linked to them, both in the order of 0(100) . In this framework, breakthrough technologies are represented as a network where nodes represent technologies and links represent dimensions of similarities between these technologies. Network-level metrics provide proxies for estimating the benefit of a node and the cost of a link. The benefit is derived based on the position of the node in the network, and the cost of a link is estimated based on the similarities of technologies it connects. As firms consider a particular target technology, the framework offers a way to calculate the payoff of following a particular path in the network to attain the target from any one of the technologies already in the firm's portfolio. The model provides a recommendation for the best strategy under specific competitive scenarios. Finally, the application of this method is illustrated with various use cases, to analyze strategic decisions made by companies and to explore some that are ongoing. In particular, this analysis looks at hypothetical two-player strategic games in the energy sector, comparing the competitive positions of SolarCity, Siemens and Google to conclude that all three companies have dominant strategies to invest in this sector. The framework was also applied to a strategic game where Google competes with Magic Leap, in the bio-fuel sector and showed a dominant position for Google. The last three scenarios analyzed represent real-world cases, two in the autonomous vehicle domain involving Apple and Toyota and Apple and Tesla and one in the robotics domain involving Toyota and Amazon. The analysis showed the existence of a coordination game in the autonomous vehicle sector where collaboration was beneficial for all parties. Finally, in the robotics case involving the sell-off of Boston Dynamics by Google, the analysis showed that Toyota can leverage a first mover's advantage to create a dominant strategy against Amazon.