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Strategic management scholars have long explored the broad topic of innovation, a cornerstone in creating competitive advantage. Any attempt at theory construction in this area must encompass reliable and valid measures for key innovation characteristics. Yet, with respect to an important construct, i.e., disruptiveness of innovations, there has been relatively little academic research. Without formalizing the disruptiveness concept with a reliable and valid measure, it is difficult to conduct rigorous research to uncover the causes of the innovator's dilemma and identify mechanisms to help incumbents develop such innovations. In this paper, we develop a scale for the disruptiveness of innovations. We collected data from senior executives (vice president or general manager level) at 199 strategic business units (SBUs) in 38 Fortune 500 corporations and performed a series of analyses to establish the reliability and validity of the disruptiveness scale. The reliability measures, exploratory factor analysis, confirmatory factor analysis, and subsequent statistical tests strongly support our measure. Further, we also present nomological validity of the disruptiveness construct, thus establishing its predictive validity. Thus, this paper distinguishes the disruptiveness concept from other established innovation constructs, such as radicalness and competency destroying. Finally, we discuss the significance of our results and how this study might be useful to other researchers. Copyright © 2006 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Innovative industries are often characterized by rapid product turnover. Product longevity may be driven by both a product's position within a market as well as its position within a firm's larger product portfolio. However, we have little understanding of the relative importance of these factors in determining product turnover and how they interact as an industry evolves. Although researchers have invested substantial effort in analyzing firm survival and turnover, there are far fewer studies of the determinants of product survival and turnover. We use hazard rate models and count regression models to describe the behavior of firms and their products with a new and detailed database on the laser printer industry. We show, first, that competition and market structure variables have a large impact on both speeding product exit and delaying product entry. Second, there is some evidence that firms that have maintained a high market share for a number of years keep their products on the market longer than those with lower market share. Finally, firms with high innovative capacity tend to enter markets frequently, but withdraw their products at average rates. Firms with strong brands tend to introduce few products and withdraw their products slowly. With these findings, the paper links product entry and exit decisions to the broader literature on firm strategic and product management. [ABSTRACT FROM AUTHOR]

A central part of the innovation process concerns the way firms go about organizing search for new ideas that have commercial potential. New models of innovation have suggested that many innovative firms have changed the way they search for new ideas, adopting open search strategies that involve the use of a wide range of external actors and sources to help them achieve and sustain innovation. Using a large-scale sample of industrial firms, this paper links search strategy to innovative performance, finding that searching widely and deeply is curvilinearly (taking an inverted U-shape) related to performance. Copyright © 2005 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper extends current knowledge of industry clusters by disentangling the effects of networks from cluster (i.e., distinctly geographic) mechanisms on firm performance as well as by studying the influence of these different mechanisms on firms located inside and outside the industry cluster. It also highlights the importance of simultaneously modeling multiple networks which may differentially influence important firm outcomes. In the paper, I model the innovativeness of Canadian mutual fund companies as a function of their geographic location--inside or outside the industry cluster of Toronto--and of their centrality in networks of managerial and institutional ties. I find that locating in the industry cluster as well as centrality in the managerial tie network enhances firm innovation, while centrality in the institutional tie network does not. [ABSTRACT FROM AUTHOR]

Increasingly, strategy scholars are exploring the relationships between innovation, competition, and the persistence of superior profits. Sustained high profitability may result when a firm repeatedly introduces valuable innovations that service previously unmet consumer demands. While the returns to the firm from each innovation may erode over time, innovation ensures that, overall, the firm maintains a high performance position. At the same time, sustained high profitability may also accrue to firms that innovate less often, but effectively avoid the competition that otherwise erodes high returns. This paper elaborates these relationships before presenting an empirical analysis of the effects of differential innovative propensities and differential rates of competition on pharmaceutical firms' abilities to sustain profit outcomes that are above those earned by competing firms. The analysis, which is situated within the U.S. pharmaceutical industry, finds support for the expected relationship between high innovative propensity and sustained superior profitability, but no support for a link between persistence and the ability to avoid competition. [ABSTRACT FROM AUTHOR]

The assumption that 'local search' constrains the direction of corporate R&D is central in evolutionary perspectives on technological change and competition. In this paper, we propose a network-analytic approach for identifying the evolution of firms' technological positions. The approach (1) permits graphical and quantitative assessments of the extent to which firms' search behavior is locally bounded, and (2) enables firms to be positioned and grouped according to the similarities in their innovative capabilities. The utility of the proposed framework is demonstrated by an analysis of strategic partnering and the evolution of the technological positions of the 10 largest Japanese semiconductor producers from 1982 to 1992. [ABSTRACT FROM AUTHOR]

This paper draws on the social and behavioral sciences in an endeavor to specify the nature and microfoundations of the capabilities necessary to sustain superior enterprise performance in an open economy with rapid innovation and globally dispersed sources of invention, innovation, and manufacturing capability. Dynamic capabilities enable business enterprises to create, deploy, and protect the intangible assets that support superior long- run business performance. The microfoundations of dynamic capabilities—the distinct skills, processes, procedures, organizational structures, decision rules, and disciplines—which undergird enterprise-level sensing, seizing, and reconfiguring capacities are difficult to develop and deploy. Enterprises with strong dynamic capabilities are intensely entrepreneurial. They not only adapt to business ecosystems, but also shape them through innovation and through collaboration with other enterprises, entities, and institutions. The framework advanced can help scholars understand the foundations of long-run enterprise success while helping managers delineate relevant strategic considerations and the priorities they must adopt to enhance enterprise performance and escape the zero profit tendency associated with operating in markets open to global competition. Copyright © 2007 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

In this paper, we examine the emergence of resources. Our analysis of technological capability acquisition by global U.S.-based chemical firms shows that the emergence of resources is inherently evolutionary We find that path-creating search that generates resource heterogeneity is a response to idiosyncratic situations faced by firms in their local searches. Two such idiosyncratic situations--technology exhaustion and expansion beyond national markets--trigger firms in our sample to create unique innovation search paths. We also find that along a given path firms experiment in order to find the correct investment--in fact, some organizations seem to take a step backward for two steps forward--further demonstrating the evolutionary nature of the resource creation process. [ABSTRACT FROM AUTHOR]

This paper investigates how firms' decisions to outsource or internalize production affect their technological performance. While several popular arguments and some anecdotal evidence suggest a direct association between outsourcing and technological performance, the effects of firms' governance decisions are likely to be contingent upon several specific attributes underlying a given exchange. This paper first demonstrates how standard performance models can improperly suggest a positive relationship between firms' outsourcing decisions and their technological performance. Models that account for firm- and transaction-specific features are then presented, which indicate that neither outsourcing nor internalization per se result in superior performance; rather, a firm's technological performance is contingent upon the alignment between firms' governance decisions and the degree of contractual hazards. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between intercorporate technology alliances and firm performance. It argues that alliances are access relationships, and therefore that the advantages which a focal firm derives from a portfolio of strategic coalitions depend upon the resource profiles of its alliance partners. In particular, large firms and those that possess leading-edge technological resources are posited to be the most valuable associates. The paper also argues that alliances are both pathways for the exchange of resources and signals that convey social status and recognition. Particularly when one of the firms in an alliance is a young or small organization or, more generally, an organization of equivocal quality, alliances can act as endorsements: they build public confidence in the value of an organization's products and services and thereby facilitate the firm's efforts to attract customers and other corporate partners. The findings from models of sales growth and innovation rates in a large sample of semiconductor producers confirm that organizations with large and innovative alliance partners perform better than otherwise comparable firms that lack such partners. Consistent with the status-transfer arguments, the findings also demonstrate that young and small firms benefit more from large and innovative strategic alliance partners than do old and large organizations. [ABSTRACT FROM AUTHOR]

Building on the agency view of corporate governance, we propose that technology-intensive firms use both outcome and behavior-based performance criteria for rewarding CEOs. Using a sample of 206 firms from 12 U.S. manufacturing industries, we find that as technological intensity increases CEO bonuses are more closely linked to financial results and that total CEO incentives are associated with two indicators of desirable innovation behaviors: invention resonance and science harvesting. Invention resonance refers to the impact a firm's inventions have on other firms' inventions, while science harvesting reflects a firm's commitment to scientific research. As technological intensity increases, aligning bonus with financial results, total incentives with invention resonance, and total incentives with science harvesting predict firm market performance. Copyright © 2006 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper reports findings from a study that combined two theoretical perspectives--top manager and network/institutional--to examine the factors influencing organizations to adopt innovative management practices. The study setting was a system of public hospitals and the innovation was Total Quality Management (TQM). Study results indicate that both top manager and network/institutional factors are important determinants of whether and when organizations adopt innovations. However, as predicted, the relative importance of these two sets of factors appears to change as an innovation becomes more widely diffused. [ABSTRACT FROM AUTHOR]

This paper examines the impact of acquisitions on the subsequent innovation performance of acquiring firms in the chemicals industry. We distinguish between technological acquisitions, acquisitions in which technology is a component of the acquired firm's assets, and nontechnological acquisitions: acquisitions that do not involve a technological component. We develop a framework relating acquisitions to firm innovation performance and develop a set of measures for quantifying the technological inputs a firm obtains through acquisitions. We find that within technological acquisitions absolute size of the acquired knowledge base enhances innovation performance, while relative size of the acquired knowledge base reduces innovation output. The relatedness of acquired and acquiring knowledge bases has a nonlinear impact on innovation output. Nontechnological acquisitions do not have a significant effect on subsequent innovation output. [ABSTRACT FROM AUTHOR]

Scholars have advanced various theories to explain the common failure of market leaders in the face of revolutionary technological change. The history of NCR Corporation provides an instructive exception to that general pattern. This paper examines how NCR addressed the introduction of electronics to the field of business equipment and the advent of digital computers to widespread use. It describes NCR `s entry into the computer industry in the 1950s and its commitment to evolutionary adaptation of its core products. It shows how persistence in old modes of practice led eventually to a crisis, which was resolved favorably when new management and fundamental organizational transformations reversed adverse trends and restored robust profitability. While established academic theories can help to explain aspects of the story, no single theoretical perspective is sufficient to explain the path of NCR's behavior. NCR survived, we conclude, because new leadership provided the impetus to actualize latent dynamic capabilities. [ABSTRACT FROM AUTHOR]

This paper addresses issues of global innovation in multinational corporations by examining the patterns of communication and control in international R&D operations. Using a sample of 110 international R&D units from 15 multinational corporations, we identify three types of R&D unit role (local adaptor, international adaptor, international creator). We show that: (1) each type of R&D unit is managed primarily through a different mode of control; (2) local and international adaptors both focus their communication on their internal corporate network; and (3) international creators have strong internally and externally oriented networks of relationships. The implications for the management of global innovation are discussed. [ABSTRACT FROM AUTHOR]

By highlighting conditions under which viable interorganizational relationships do not materialize, we explore the limitations of interorganizational knowledge acquisition. In the empirical context of corporate venture capital (CVC), we analyze a sample of 1,646 start-up-stage ventures that received funding during the 1990s. Under a regime of weak intellectual property protection (IPP), an entrepreneur-CVC investment relationship is less likely to form when the entrepreneurial invention targets the same industry as corporate products. In contrast, under a strong IPP regime, industry overlap is associated with an increase in the likelihood of an investment relationship. Our findings suggest that many relationships do not form because the corporation will not invest unless the entrepreneur discloses his or her invention, and the entrepreneur may be wary of doing so, fearing imitation. To the extent that a CVC has greater capability and inclination to target same-industry ventures, such industry overlap would exacerbate imitation concerns under a weak IPP regime, yet facilitate an investment relationship under a strong IPP regime. Beyond CVC, this insight may explain patterns of other interorganizational relationships, including research and development alliances and technology licensing between start-ups and incumbents. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This study aims to provide a better understanding of the effect of social networks on innovation through the analysis of territorial agglomerations of firms. Critical voices argue that the same mechanisms that form the basis of efficient, continuous improvements of clustered firms can also be considered as limitations. We suggest that the impact of social capital decreases beyond a certain point of development. In fact, the effect of social interactions and trust on firm value creation can be described as an inverted U-shaped curve. The study is based on a sample of 154 firms in the Valencia region of Spain. Implications of the study have relevant prescriptions for regional planners and individual entrepreneurs. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Many studies argue that the continual creation of new ideas by small and young firms steadily destroys the competitive positions of their larger, more established rivals. Despite this attention, empirical results relating firm size to innovation remain exceedingly fragile. This study proposes three reasons for the empirical inconsistencies in the literature: that small and large firms differ in their: (1) stock of technological experiences, (2) use of own- and partner-firm experiences, and (3) abilities to translate own- and partner-firm experiences into innovation activity. Results from a 10-year study of 463 semiconductor firms demonstrate that the mixed findings generated from prior work are partially attributed to these three general propositions. In particular, resource flows, in the form of operating experience developed internally and accessed through codevelopment partners, positively affect innovation activity; but these benefits diminish as a firm increases in size. The findings broadly support the notion that differences in the incentives and abilities of small and large firms give rise to heterogeneity in the firms' innovation activity. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Entrepreneurs in high-technology industries often have prior experience at incumbent firms, but we know little about how knowledge obtained at the prior employer impacts entrepreneurial performance. Drawing on previous work from strategy, economics, and organizational sociology, I assess the impact of industry experience on entrepreneurial performance and innovation in medical device start-ups. I find that spawns (ventures started by former employees of incumbent firms) perform better than other new entrants. Interestingly, my findings suggest that this superior performance is not driven by technological spillovers from parent to spawn, but rather by nontechnical knowledge related to regulatory strategy and marketing. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

The impact of strategies used to appropriate innovation rents on firm performance is analyzed using a sample of U.S. public manufacturing firms. Stronger appropriability at the firm level, achieved through patent protection or the ownership of specialized complementary assets, leads to superior economic performance, as measured by the stock market valuation of a firm's R& D assets. Among commonly used ‘nonconventional’ patent strategies, preemptive patenting allows incumbents to strengthen their market power. Consistent with theory, such effect is higher for incumbents with higher ex ante market power and facing a higher threat of entry, and lower when R& D competition is characterized by the discovery of drastic innovations. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This empirical study of business-to-business service firms examines the determinants and effects of control rights to intellectual assets in a property rights theoretic framework. Regression analyses using survey data suggest that service suppliers that retain control over their intellectual output are more innovative. In long-term relationships, service firms' clients may thus be better off balancing their need to control outsourced activities with the suppliers' incentives to invest in learning and innovation. Additionally, and aligned with property rights theoretic predictions, service suppliers' bargaining power and their indispensability in service projects are positively associated with their ability to retain control rights. In contrast, innovation capabilities are not very significant in determining control rights allocation between service suppliers and their clients. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Inventions differ in terms of the age of the knowledge base they build upon. We examine what effects differences in the recency of knowledge inputs have on financial performance. Using threshold regression analysis, we isolate three regimes that exhibit different associations between recency and stock return. We find that for firms whose new patents use inputs in the mid-range of the technological recency distribution, the relationship is positive; higher recency leads to higher stock return. However, for firms whose new patents make use of either nascent or very mature technological inputs, the effects are negative; higher recency leads to lower stock return. These findings indicate that it is not firms utilizing the most recent technological inputs that experience the highest returns to their inventive activity. Indeed, firms operating at the technological input frontier have market returns significantly below the mean. Rather, it is firms whose new patents utilize medial-aged technological inputs (i.e., firms using inputs slightly behind the technology frontier) that tend to experience the highest returns. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

The impact of corporate social performance on firm financial performance has been examined previously with mixed results. This study examines the possibility that corporate social performance enhances financial performance by allowing the firm to differentiate, and that this effect may be moderated both by innovation, which also drives firm differentiation, and the level of differentiation in the industry. Hypotheses concerning both direct and moderating effects are developed and tested using secondary data. Our results support both innovation and the level of differentiation in the industry as moderators for a positive relationship between corporate social performance and financial performance: corporate social performance most strongly affects performance in low-innovation firms and in industries with little differentiation. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Most prior research has focused on vertical integration or strategic outsourcing in isolation to examine their effects on important performance outcomes. In contrast, we focus on the simultaneous pursuit of vertical integration and strategic outsourcing. Our baseline proposition is that balancing vertical integration and strategic outsourcing in the pursuit of taper integration enriches a firm's product portfolio and product success, and in turn contributes to competitive advantage and thus to overall firm performance. We derive a set of detailed hypotheses, and test them on a unique and fine-grained panel of longitudinal data documenting over 3,500 product introductions in the global microcomputer industry. The results provide strong support for the notion that carefully balancing vertical integration and strategic outsourcing when organizing for innovation helps firms to achieve superior performance. Copyright © 2006 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

To foster ‘creative destruction,’ entrants must survive the turbulent conditions they face in their first crucial years in the industry. We investigate how the external knowledge milieu of an entrant, conceptualized as its innovative environment, causes systematic variation in survival patterns. We test our model from 3,431 firms in 33 industries over 80 years. We depict the innovative environment along two knowledge-related dimensions, namely technology regime and technology intensity. While the aligned state of the innovative environment, where product innovation exists in tandem with abundant innovation opportunities, promotes entrant survival, we find that this beneficial effect is more pronounced for small entrants due to a possible mitigation of scale disadvantages. [ABSTRACT FROM AUTHOR]

We explore the conditions under which firms are likely to pursue equity investment in new ventures as a way to source innovative ideas. We find that firms invest more in new ventures--commonly referred to as 'corporate venture capital'--in industries with weak intellectual property protection and, to some extent, in industries with high technological ferment and where complementary distribution capability is important. Furthermore, we find that the greater a firm's cash flow and absorptive capacity, the more likely it is to invest. Our results suggest that in Schumpeterian environments incumbents may supplement their innovative efforts by tapping into the knowledge generated by new ventures. [ABSTRACT FROM AUTHOR]

We explore the link between a firm's organization of research --specifically, its choice to operate a centralized or decentralized R&D structure --and the type of innovation it produces. We propose that by reducing the internal transaction costs associated with R&D coordination across units, centralized R&D will generate innovations that have a larger and broader impact on subsequent technological evolution than will decentralized research. We also propose that, by facilitating more distant ('capabilities-broadening') search, centralized R&D will generate innovations that draw on a wider range of technologies. Our empirical results provide support for our predictions concerning impact, and mixed results for our predictions concerning breadth of search. We also find that control over research budgets complements direct authority relations in contributing to innovative impact. We propose several extensions of this research. [ABSTRACT FROM AUTHOR]

One of the concerns with strategy as a field is that its goal (durable profits) appears at odds with that of microeconomics (homogeneous firms with zero profits). Thus even if we can find sources of durable profits, maybe we shouldn't—because doing so comes at the expense of social welfare. In this sense, strategy is an 'economic bad.' Probably the most vivid evidence of this tension is the fact that Porter's Competitive Strategy (1982) is Industrial Organization turned on its head—exploiting indications of anti-competitive behavior to create prescriptions for durable profits. This study presents a parallax view in which the field of strategy is an economic good. In this view, heterogeneity stimulates innovation and economic growth. The underlying logic Is that heterogeneity fuels diffusion; diffusion erodes leaders' shares: the loss of shares stimulates innovation, which in turn fuels new diffusion. I develop this view through a simple model of firms embedded in an industry, and then evaluate the model via simulation. The key issue for the model is whether there are steady states that sustain heterogeneity and innovation. Results indicate that heterogeneity persists in roughly half the industry conditions I examined. Furthermore innovation and growth are sustained under those conditions. What is comforting about the set of conditions is that they accommodate (and indeed require) all the things we hold dear: industrial policy, and strategic as well as routine behavior by firms. The new insights are as follows: (1) heterogeneity fuels growth (thus 'strategy' is an economic good, rather than anathema to allocative efficiency): (2) persistent heterogeneity is feasible even in the presence of spillovers (without isolating mechanisms): (3) but this heterogeneity (white persistent) requires managers to actively preserve the inherent value of their resource advantages—firms can't rest on their laurels: (4) policy prescriptions differ from those of prior innovation models. [ABSTRACT FROM AUTHOR]