The outsourcing of innovation to small firms could not have happened had financing not been available. Traditional manufacturing industries use computer-aided design and production. Retailers integrate backward into the wholesale function and develop communication channels that run from the scanner at the checkout to new orders to the manufacturer. Specialty chains operate small establishments that are linked to gain the advantages of scale. Truckers use the Internet to locate loads and avoid empty back-hauls.
Farmers use satellite information on rainfall and crop conditions.
One possible answer is that competition really has increased. The ability to take advantage of the new technology productively may be essential for survival but need not provide old economy companies with a unique advantage. It seems that increased market value is associated with the intangible assets of a new technology or a brand or a dominant market position. As US Treasury Secretary Summers said recently, the new economy is highly Schumpeterian. Innovation generates a temporary competitive advantage for a company, allowing it to earn strong profits for a period.