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It depends.

If the market creates an innovation engine, then participants in the market will compete over scraps. Unix, the Windows application environment, Apple and Android marketplaces, consumer fashion.

If a company creates an innovation engine, then it can ride a stream of development that gives it a persistent advantage: 3M, Edison, Apple, Google, Intel. Possibly IBM (though I'd count its success on other factors, despite a few periods of significant innovation).

Contrast this with companies which created one big idea and camped on it for a long time: AT&T, Xerox, Boeing, Microsoft, Comcast. These have essentially leveraged economies of scale, regulatory environments, and monopolies to capture and retain a market for an extended period of time during which little if any real innovation happened. Oftentimes these companies actively discouraged significant new innovation (AT&T and IP telephony, Boeing and high-speed rail, Microsoft and OS alternatives from DR-DOS to OS2 to Novell to Linux, Comcast with municipal broadband).

It depends on whether or not your goal is market dominance or advancing overall conditions. I'd like to see an innovation-based strategy encouraged, and demand-side benefits of scale doesn't deliver on this.

Agreed - great differentiation between company and market dynamis. Looks like you have done some thinking on this topic.

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