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Technological Change

As you might expect, technological change is one of the most important triggers of opportunities to start new high technology companies, largely because technological change allows people to do things that could not be done before or only could be done in a less efficient manner.[2] Take, for example, the invention of the computer software behind e-mail. This software made it possible to communicate in ways that are more efficient than the telephone, fax, or letters, and so opened up a valuable opportunity.

So, what attributes of technological change are associated with the creation of valuable opportunities for new businesses? The magnitude of the technological change is important. The larger the technological change, the greater the opportunity for new businesses to be created because larger magnitude changes affect more uses for technology, allowing the use of new technology in more things. Take, for instance, the creation of a new type of electrical circuit. If that new circuit is only 10 percent faster than an older one, it will replace the older circuit in only a small number of things. Only those products in which a 10 percent improvement would exceed the cost of change will use the new circuit. In contrast, if the new circuit is 500 percent faster than the older one, its benefits will exceed the cost of the change in a much larger range of things.


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