The GSM standard and Nokia as an incubating entrant

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Christopher Palmberg
The Research Institute of the Finnish Economy (ETLA), Lönnrotinkatu, Helsinki, Finland

Olli Martikainen
Department of Information Processing, Sciences, University of Oulu, Finland

PP: 61 - 78

Abstract

The Finnish telecom industry is largely based on the unprecedented success of Nokia. The GSM standard is interesting in this context. It is at present the most widely diffused telecom standard in the world, and largely accounts for the international breakthrough and market leadership of Nokia. Moreover, the GSM was discontinuous to the incumbent equipment suppliers compared to previous standards.

This paper identifies the nature and consequences of these discontinuities, and analyses the conditions and processes that contributed to Nokia's ability to successfully enter the market ahead of incumbents in the industry.

We suggest that Nokia was an 'incubating entrant' by possessing latent competencies in discontinuous GSM-related technologies, even though it was a new entrant in the field of cellular systems. We also suggest that this largely explains Nokia's subsequent success, and question some underlying assumptions of the literature on technology competition and industrial dynamics.

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Keywords

Nokia, GSM, discontinuity, incumbency, entry

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