We construct a novel measure of technology sectoral disruptions (TSDs) using a dynamic text-based spatial model of patents based on the extent to which innovation is suddenly highly correlated across multiple industries. We identify multiple TSDs occurring over a 70-year period of time. Abnormal stock returns and insider trading indicate that TSDs are unexpected and have a permanent positive impact. Relative to large firms, small firms experience higher R&D, investments, asset growth, and longlasting value gains. The gains among small firms are consistent with Schumpeter’s 1912 theory of creative destruction and Arrow’s 1962 replacement theory of innovation by smaller firms.