Creative Destruction

Joseph Schumpeter argued that large-scale firms with monopoly power were superior over market structures with perfect competition (Waldman and Jensen, Industrial Organization, p471). He based this assertion on his theory of creative destruction, which put forward the idea that “capitalism moves forward in major technological leaps that destroy the old economic order and create a new order” (Waldman and Jensen, Industrial Organization, p641).

Can the theory of creative destruction be applied to the browser wars? For a long period of time, Microsoft dominated market share for web browsers. This domination can be attributed to the fact that Internet Explorer is packaged with Microsoft’s Windows operating system. Internet Explorer has been declining and losing market share to other browsers; specifically, Mozilla’s Firefox browser.

Firefox offered features that Internet Explorer lacked such as tab browsing, add-ons, themes, good security, open source code for continued improvement and so forth. Microsoft finally played catch up and released a version of Internet Explorer that finally offered many of the features its competitors had been offering for quite some time now.

Today, Mozilla releases its latest Firefox and we will see how it improves its browser with the current release candidate. Although it’s hard to imagine that Microsoft will be “destroyed” from the browser market due to its market power, one thing is certain; Mozilla’s and other browsers continued innovation will force Microsoft to continue tweaking its internet explorer or it will keep losing market share.

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