The Sailing Ship Effect is a phenomenon in business by which the introduction of a new technology to a market accelerates the innovation of an incumbent technology. The term was coined by W.H. Ward in 1967 in reference to advances made in sailing ships in the second half of the 1800s in response to the introduction of steamships. According to Ward, in the 50 years after the introduction of the steam ship, sailing ships made more improvements than they had in the previous 300 years. The term "Sailing Ship Effect" applies to situations in which an old technology is revitalized, experiencing a "last gasp" when faced with the risk of being replaced by a newer technology.
Contents
This effect is the economic version of a phenomenon in biology called the red queen effect.
Causes
Three possible explanations have been suggested as the cause of the Sailing Ship Effect:
Controversy
In 2005, the validity of the original example of the Sailing Ship Effect was called into doubt. In a paper entitled "The Response of Old Technology Incumbents to Technological Competition: Does the Sailing Ship Effect Exist?" author John Howells contends that sailing ships and steamships serviced different market segments in the 1860s and 1870s and, therefore, were not directly competing technologies. Howells goes on to hypothesize that rapid advancements in sailing technology of that era may have arisen from competition between sailing ship firms. The paper goes on to call into doubt the prevalence of the phenomenon. Other scholars have different views on the topic, while the sailing-ship effect has been also analysed by means of a mathematical model (De Liso and Filatrella 2008). A recent paper by Sandro Mendonca argues that "The modernisation of the sailing trader occurs before, not after, the steamship had become an effective competitor", and further cautions "if history is to be used to give credence to explanations of empirical regularities in a variety of settings the original source of the relevant concepts must be carefully revisited and deeply researched". (Mendonca, 2013)