Chapter 2: Competitive Innovation in the U.S. Airline Industry

The history of competition and technological change in the U.S. airline industry offers insights into how competitive innovation influences the development of business models and economic growth. The quarter century following deregulation saw many attempts at innovation. Experiments with new business models occurred in stages; where the learning gained in each phase set the stage for competitor and consumer reaction, which then brought on subsequent experiments and further change. After 2 decades of evolution and upheaval, the airline industry was reshaped along the lines of lower prices, more choices, and better service. This chapter presents a record of industry evolution as a mosaic of new business practices, technological innovation, and institutional change, which together offers insights as to how competitive innovation contributes to new business models and economic growth.