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The process by which new uses or functions for an existing artifact (e.g. technology) emerge is an important yet understudied source of innovation. We call this process functional diversification (FD). We measure and characterize FD by focusing on the emergent uses of a class of technological resources: pharmaceutical drugs. We show that FD contains both an adaptive and an exaptive part and that it exhibits several empirical regularities regarding the number of new uses embedded in existing technological resources, the distant/proximate distribution of uses relative to their original use, and the role played by what in the life sciences are known as “mechanisms of action” and in the technology realm “functionalities” in the generation of new uses. We argue (or suggest) that FD is at the core of several theoretical perspectives—exaptation, Penrose’s firm growth, and shadow option theories—whose complementarities could be integrated into a general framework to understand and manage the emergence of new uses from existing resources.

We trace the history of Gabrielle “Coco” Chanel’s entrepreneurial journey as a fashion designer from her early years as an outsider (early 1900s) to her rise to success and consecration as an icon within the French haute couture field (early 1930s)—a field controlled by powerful insiders. Our study sheds light on the social forces and historical circumstances underlying an outsider’s journey from the margins of an established field to its core. Drawing on unique historical material, we develop a novel process view that highlights the shifting influence of forces operating at different levels in the accumulation, deployment, and conversion of various forms of capital (i.e., human, social, economic, and symbolic) that outsiders need to promote their ideas. In particular, our multilevel perspective accounts simultaneously for the individual’s efforts to push forward these ideas (micro-level), as well as the audience dynamics (meso-level) and exogenous forces (macro-level) that shape their recognition. Chanel’s historical case analysis also affords a window into one of the first female entrepreneurs with global impact in business history, with the added challenge of establishing herself in what at the time was a male-dominated and mature field.

We examine the progress of the evolutionary research on innovation, the firm, and the dynamics of industries in the last four decades. The paper acknowledges that the themes related to knowledge and technological regimes, the evolutionary processes leading to innovation, and the long-term dynamics of technologies have generated, and still remain, relevant research trajectories. The same can be said for the research trajectories on organizational and dynamic capabilities, evolutionary strategies, vertical integration, diversification, niche construction, and authority and power in organizations. Important progress has also been made in understanding the evolutionary trajectories of industries, the link between industry architecture and industry dynamics, the types of knowledge of entrants, the role of focal and vertical spinouts, the relevance of institutions and sectoral innovation systems in industry dynamics, and the catch-up process by firms from latecomer countries. We argue that future developments in the evolutionary camp should continue to be characterized by eclecticism and multidisciplinarity, as well as by the integration of different methodologies from cases to stylized facts, quantitative analyses, appreciative theorizing, and formal modelling. We conclude with an analysis of the main methodologies used by evolutionary scholars and a discussion of the road ahead.

Social control agents (SCAs) discipline organizations and draw the line between appropriate organizational behaviour and misconduct. While prior research focuses on the SCA-organization relationship, we theorize how a key audience (people) interacts with an SCA depending on its decisions to sanction or not organizational misconduct. Building on sociological and organizational research on social norms and their enforcement, we expect that people are more likely to agree with an SCA that sanctions a behaviour that violates rule-based as opposed to value-based norms. Violations of rule-based norms generate more agreement because such norms are less ambiguous and ascertaining when they are violated is easier to establish. As people agree more with SCA decisions to sanction rule-based violations, we expect that the propensity of people to resort to the SCA increases. We find support for our hypotheses with a survey, a series of experiments, and the analysis of complete data on complaints by UK citizens to the Advertising Standards Authority – the UK SCA on advertising – over the period 2007–10. Our paper contributes to research in organizational misconduct by showing how SCAs are both an evaluating entity and an evaluated one and by shedding light on how people co-determine what an acceptable or unacceptable behaviour is. Our paper uniquely links macro- and micro-level studies on corporate misconduct, putting centre stage that SCA's authority essentially depends on a key audience's agreement with the SCAs' underlying norms that underpin their decisions.

Research Summary: Building on social psychology research and entrepreneurship work on linguistic framing, we argue that the appreciation of novel ideas varies with the mental construal that members of different audiences use to evaluate them. Specifically, we theorize that the congruency between idea framing and audiences' mental construals depends on audiences' level of expertise in evaluating novel ideas. In four experiments, we found that innovators benefit from deploying framing strategies congruent with audiences' mental construals: novices (e.g., lay people, crowdfunders) appreciate more novel ideas framed in abstract why terms, while experts (e.g., professional investors, innovation managers) novel ideas framed in concrete how terms. Integrating the strategic framing of novel ideas with construal level theory and audience heterogeneity contributes to research on entrepreneurship, innovation, and impression management. \ud \ud Managerial Summary: One of the critical challenges that innovators (e.g., entrepreneurs) face is to persuade relevant audiences (e.g., users, crowdfunders, professional investors, and innovation managers) to support their novel ideas. This article integrates various literatures concerned with the evaluation of novelty to examine the impact of different framing strategies on the reception of novel ideas by different audiences. By demonstrating that the framing of a novel business idea affects audience members' evaluation, and that the effectiveness of different frames (why vs. how) varies with the target audiences (novices vs. experts), we offer actionable insights into how innovators can strategically use linguistic framing to increase the likelihood of eliciting favorable evaluations and resource commitment for their ideas.

In this paper, we contribute to the literature on new market emergence by implementing a “history-friendly” simulation of the incubation period encompassing the decision processes that took place within General Motors (GM), Chrysler, and Ford during the design and development of the first U.S. minivan. Our work offers a “middle ground” alternative methodology for unpacking the “black box” of market incubation processes. Our middle ground approach is useful for exploring the complex interdependencies among four general mechanisms that shape market incubation: environmental shocks that open up new technological possibilities, firm-level capabilities that allow firms to differentially take advantage of these possibilities, various incentives (e.g., product cannibalization, rivalry) that influence a firm’s willingness to exploit new possibilities, and managerial beliefs about the viability of these possibilities. Complex nonlinear interdependencies exist among these mechanisms, and historical contingencies affect the way in which they interact. We identify important historical contingencies within and across GM, Ford, and Chrysler in their precommercialization managerial decisions prior to Chrysler’s introduction of the Voyager and Caravan in 1983. We use the historical details of actual market incubation to calibrate the simulation and develop plausible alternative (both near and hypothetical) histories of that incubation. Understanding why Chrysler, Ford, and General Motors made their respective product commercialization choices not only pertains to automotive history, but can also illuminate the complexities inherent in market incubation processes.

Framing your message is the essence of targeting a communication to a specific audience. It is the art of pitching an idea to get the broadest possible support. Although conceptually intuitive, the reality is that most of us don’t think strategically enough about how to properly frame our ideas to maximize impact because we take communication for granted. This can be an especially severe limitation for entrepreneurs and innovators striving to get their projects off the ground.

Coco Chanel, Steve Jobs, and Katalin Karikó were outsiders who defied the odds and produced revolutionary innovations. How do such outsiders succeed when so many others fail? The authors’ research uncovered four factors: (1) The outsiders were not outliers; they belonged to the system but hadn’t lost touch with its fringes. (2) An outsider had at least one insider who was willing to vouch for his or her ideas or abilities. (3) Outsiders leveraged “fracture points” — such as the death of a major gatekeeper. (4) Instead of just viewing their innovation as a technical challenge, they see it as a marketing challenge.

Consecration represents the most definitive form of legitimation in every cultural field. Complementing previous research focused on individual, contextual, and structural conditions underpinning consecration, this paper takes a sequence analytical perspective and explores whether diverse creative trajectories are more frequently associated with consecration. We introduce the notion of signature style and the pace of category spanning as key features for consecration. We argue that a consecrated signature style is just as likely to result from a producer’s adherence to a specific style over time or from a consistent (and fast-paced) category-spanning creative trajectory. The resulting identity will be specialist in the first case, eclectic in the second. We analyze the stylistic trajectories of 863 electronic music artists and find robust support to our hypothesis. The analysis is corroborated by further exploratory findings that identify intriguing questions for future research. By examining the organization of creative journeys in the career of cultural producers, this paper emphasizes the importance of considering the unfolding and rhythm of creativity over time. This temporal perspective sheds new light on the dynamics of distinctiveness and consecration in cultural fields.

At the root of the conceptual difficulties in determining the competitive structures that underpin markets is the fact that firms and their product offerings can be described along a large number of attributes, and so be viewed as more or less similar depending on the attributes used for comparison. Our chapter exposes the multi-level cognitive embeddedness of competition among restaurants in New York City. Using field interviews and archival data on restaurant evaluations, categories, pricing, and menus, we employ qualitative counterfactual analysis to address fundamental issues concerning competitive boundaries that cut across categorical, organizational, and transactional perspectives of competition. We argue that conceptualizations of competition are only loosely coupled across different perspectives, and we contend that competitive judgments are better construed as a collective sensemaking process where different actors interact and competitive boundaries are constantly defined, contested, and redefined. Thus, we propose a heuristic framework for understanding the cognitive embeddedness of competition as part of a broader sensemaking perspective of competition.

Two main accounts of the effect of social proximity between candidates competing for recognition and members of the evaluating audience can be extrapolated from extant literature on peer-based tour...

We suggest that a systematic socio-cognitive approach to “competitive sensemaking” has been absent from theory and research on competitive strategy. We define competitive sensemaking as the social and cognitive processes that underlie how firms detect, define, and conceptualize their competitive relationships with other firms. Competitive sensemaking is a subset of the more general process of strategic sensemaking, which is the “making plausible sense” of the broad array of stimuli and circumstances that characterize complex market situations. Using the value-based view of value creation and capture as a conceptual base for our arguments, we unpack four cognitive underpinnings of competitive sensemaking: mental time travel, comparability, counterfactual reasoning, and stories. We then show how these four components were differentially involved in shaping competitive sensemaking in four actual market situations. In doing so, we illustrate how competitive sensemaking provides fundamental inputs into the value creation and value capture process. We conclude the paper by drawing out the implications of competitive sensemaking for strategy theory and research.

The publication of ‘An Evolutionary Theory of Economic Change’ by Nelson and Winter has had a major impact on economics and related fields such as innovation and strategy. All of these fields have developed owing to recent re-examinations and extensions of evolutionary theory. A paradigm that underlies several studies in this tradition is the concept of neo-Darwinian evolution—the idea that the unit of the evolutionary process (e.g. a technological artefact) is subject to a dynamic of variation, selection, and retention leading to adaptation to a predefined function. This book refers to the frameworks of punctuated equilibrium, speciation, and exaptation, which, despite their significant influence in evolutionary biology, have been reflected only partially in evolutionary approaches to economics, innovation, and strategy. This chapter introduces the book’s aim to fill this gap, and outlines the approaches and perspectives of each of the chapters.

Simulation modelling is very common in evolutionary approaches to economics, strategy, and technological innovation. A well-established simulation framework is the NK model of fitness landscapes, which is particularly useful for modelling the processes of technological adaptation, whose difficulty is reflected into how a fitness landscape behaves as a function of the number of components and internal interdependencies of a technology. However, classical NK models become problematic when modelling different types of processes, such as technological exaptation, unless a broader family of NK models is considered. After reviewing the classical NK model, this chapter explores the potential of ‘generalized’ NK landscapes, followed by a review of other important simulation frameworks in evolutionary theory, such as holey landscapes, quantum-like approaches, and history-friendly models.

Evolutionary thinking has grown significantly and has had a profound impact on various fields such as economics, strategy, and technological innovation. An important paradigm that underlies the evolutionary theory of innovation is neo-Darwinian evolution. According to this paradigm, evolution is gradualist and is based on the mechanisms of variation, selection, and retention. Starting from the 1970s, new theoretical advancements in evolutionary biology have recognized the central role of punctuated equilibrium, speciation, and exaptation in evolution and of Woesian dynamics. However, despite their significant influence in evolutionary biology, these advancements have been reflected only partially in evolutionary approaches to economics, strategy, and technological innovation. This chapter reviews these advancements and explores their key implications for innovation, such as the role of serendipity and unpre-stateability leading to disequilibrium in economics systems, and the importance of adopting an option-based logic during the innovation process.

We began this book by highlighting that, since the 1970s, several important developments have profoundly changed the field of evolutionary biology. Of particular interest here are the concepts of punctuated equilibrium, speciation, and exaptation and their centrality for understanding the emergence of novelty. Despite their influence in evolutionary biology, these advancements have received only limited attention in evolutionary approaches to economics, innovation, and strategy. By reviewing and contextualizing these advancements within the current evolutionary debate in economics, innovation, and strategy, our goal was to show how they can shed new light on some of the key assumptions of evolutionary theory, such as the idea that economic systems are in a continual state of disequilibrium. In much of the existing literature, for instance, innovation is treated as an activity that aims to respond to a direct type of question: given a problem, what is the solution? This implies that a new technology is usually ‘a working architecture of parts and modules that performs a specific function that permits the satisfaction of a predefined need’ (...

Empirical models are very common in evolutionary approaches to economics, strategy, and technological innovation, particularly those models based on large samples of patent data. Patents are legal documents that protect technologies from imitation when there is novelty and non-obviousness with respect to a prior art. Dependence on prior art means that patents cite each other and, by implication, patent databases take the form of large citation networks. Despite this implicit network nature of patent data, most current studies in innovation tend to rely on patent-based measures that exploit information within the citation network only at the local level. Nevertheless, a new stream known as ‘connectivity analysis’ is slowly emerging in the patent literature. From an evolutionary point of view, this stream is of particular importance because of its approach to patent data from a global—rather than from a local—network perspective. The aim of this chapter is to review these new directions and propose some ideas for how they could be used for modelling some of the key evolutionary phenomena discussed in this book.

As discussed in the previous chapters, technologies and artefacts embody multiple latent functions and uses that emerge contextually and serendipitously in ways that cannot be easily pre-stated. These multiple functions and uses can be seen as multiple growth options embodied in the technology. This suggests a point of contact between new evolutionary theories and the theory of ‘real options’ and more recent versions of it, such as the theory of ‘redeployability’ of resources and capabilities. At the same time, given that new functions and uses cannot be simply pre-stated, these options must not be seen in a classical sense but rather as ‘shadow options’ that emerge gradually out of their latent state. The aim of this chapter is to explore these connections. We first argue that unpre-stateability urges us to adopt option-based logic during the innovation process. We then propose a shadow-option-based approach to the emergence of new functions and uses, followed by a discussion of the implications for competitive advantage and for the generation of options in an organizational context.

Strategy scholars have widely recognized the central role that narratives play in the construction of organizational identities. Moreover, storytelling is an important strategic asset that firms can leverage to inspire employees, excite investors and engage customers' attention. This chapter illustrates how advancements in computational linguistic may offer opportunities to analyze the stylistic elements that make a story more convincing. Specifically, we use a topic model to examine how narrative conventionality influences the performance of 78,758 craftsmen selling their handmade items in the digital marketplace of Etsy. Our findings provide empirical evidence that effective narratives display enough conventional features to align with audience expectations, yet preserve some uniqueness to pique audience interest. By elucidating our approach, we hope to stimulate further research at the interface of style, language and strategy.

In this essay, we present and illustrate a few applications of social sequence analysis (SSA) to the study of creativity. Focusing on complete sequences of events rather than on localized situations, SSA enables the analytical treatment of creativity as a process that unfolds over time, offering a fuller representation of temporal dynamics of creativity than is typically possible with other methods such as event history analysis, repeated measures, or panel design methods. We suggest that SSA holds great promise for research on creative industries, as it is particularly well suited to detect similarities among diverse creative trajectories while at the same time preserving their singularities. To substantiate our suggestions we employ data from the underground electronic music field to examine trajectories of stylistic variation and illustrate how to implement sequence methods to augment and/or complement other research designs. Our purpose is to stimulate interest in SSA and encourage its application to the study of creativity at the individual, organizational and industry level.

According to thevariance hypothesis, variety-seeking or exploration is a critical condition for improving learning and performance over time. Extant computational learning models support this hypothesis by showing how individuals who are exposed to diverse knowledge sources are more likely to find superior solutions to a particular problem. Yet this research provides no precise guidelines about how broadly individuals should search. Our goal in this paper is to elucidate the conditions under which variety-seeking in organizations is beneficial. To this end, we developed a computational model in which individuals learn as they interact with other individuals, and update their knowledge as a result of this interaction. The model reveals how the type of learning environment (performance landscape) in which the learning dynamic unfolds determines when the benefits of variety-seeking outweigh the costs. Variety-seeking is performance-enhancing only when the knowledge of the chosen learning targets (i.e., individuals to learn from) provide useful information about the features of the performance landscape. The results further suggest that superior knowledge might be available locally, i.e., in the proximity of an individual’s current location. We also identify the point beyond which variety-seeking causes a sharp performance decline and show how this point depends on the type of landscape in which the learning dynamic unfolds and the degree of specialization of individual knowledge. The presence of this critical point explains why exploration becomes very costly. The implications of our findings for establishing the boundaries of exploration are discussed.

We integrate a rhetorical with an audience-mediated perspective on novelty recognition to advance a conceptual framework where recognition of novel ideas is understood as the result of the interplay between an innovator’s acts of framing and audiences’ structural characteristics. Building on storytelling and narrative research, we argue that innovators can overcome the liability of newness of their ideas by framing them so as to shape the evaluation of relevant audiences (e.g., peers, critics, investors or users). We also suggest that non-agentic mechanisms can render a field more or less permeable to the reception of novel ideas. Specifically, we propose that two audience-level characteristics affect novelty evaluation: audience heterogeneity and whether an audience is internal or external to cultural producers’ (including innovators’) professional community. Studying innovators’ acts of framing and marrying them with audience-level characteristics affords a window into a more nuanced understanding of how novel ideas are recognized and eventually accepted in cultural fields, thus offering several contributions to research on innovation and entrepreneurship and, more generally, social evaluation.

The positioning perspective in strategic management suggests that successful differentiation results from a firm’s deliberate efforts to create something that is perceived as being unique. This usually involves looking beyond the proximate to pursue distant opportunities. However, a firm that pursues local opportunities eventually may be perceived as being unique especially when competitors decide to follow other strategic paths within the same industry. In the language of the NK modeling approach, a firm can attain successful differentiation by choosing to move to a different peak (i.e., pursue distant opportunities), or to stay on the same peak in which it is currently located (i.e., pursue local opportunities). While extant strategy research has expounded the first path to differentiation, the second path has remained underexplored. Relying on a data set that combines primary and secondary sources, we use an historical case study research design to explore how and why, over time, Steinway & Sons adhered to traditional craft manufacturing methods to develop pianos that most virtuoso concert pianists still prefer today. While this commitment to craft methods enhanced the perceived uniqueness of Steinway & Sons’ pianos, it also constrained ability to adopt mass-production technologies even as other firms introduced them to reduce production costs and target piano mass markets. The case offers a counterpoint to the view that a successful differentiation strategy requires a firm to pursue distant opportunities by moving away from its current position on the competitive landscape.

Research summary: In this article, we review, integrate, and extend the literature on markets, competition, and categories as it applies to strategic management theory. Developments in the literatures of economics and organizational theory have shed new light on market categories and category dynamics. These developments highlight the fact that boundary questions are fundamental to the competitive process, and represent a fertile area for research and theory. The objective is to encourage a theoretically grounded rapprochement between current strategic management research and both older and newer research on categories and competition. Managerial summary: One of the key problems for business strategists is understanding the competitive environment and interpreting the effects of competition on a business. This article attempts to integrate various literatures in the study of competition by suggesting that strategists play a crucial role in linking abstract categories of firms and products that have become part of an industry's terminology with real-time competitive processes taking place among firms and buyers. Strategists interpret cues such as cross-elasticities of demand among their own and competing products and connect these cues to taken-for-granted categories demarcating the boundaries of markets. Simultaneously, strategists are introducing new categories by reformulating old nomenclatures and introducing new ones. We also trace the possible effects of this ‘competitive sensemaking’ on firm behaviors. Copyright © 2016 John Wiley & Sons, Ltd.

This article proposes a novel perspective of technological change based on the ‘Woesian’ model of cell evolution to study technological change and, in particular, the origins of radical innovation. The model identifies horizontal gene transfer (HGT) as a critical force that drives evolution and complements the Darwinian theory of vertical inheritance. Building on this model, we highlight the key role of the horizontal transfer of functional modules in generating radical innovation as well as strengthening the analogy between biological and technological evolution. We use the turbojet revolution to illustrate the main features of the model and elucidate the conditions under which horizontal transfer is a crucial evolutionary force leading to radical innovation. We then elaborate on the implications of the model for how firms should search for radical innovation, as well as emphasize the importance of a firm’s replicative-integrative capability—that is, the ability to ‘replicate with modifications’ existing functional modules and integrate them into a novel architecture—in shaping the generation of radical innovation.

Exaptation is one of the most important and, yet, little studied evolutionary mechanisms in the history of species, ecosystems, and artifacts (e.g., technologies). Many, if not most, of all biological traits and human artifacts that were developed for particular functions started as something different: feathers were most likely selected for thermal insulation, bones originated as excess calcium repositories, microwave ovens started life as radar magnetrons. Exaptation thus describes a discontinuous evolutionary process resulting from a functional shift of an existing trait or artifact. Despite the importance of the concept, even the term exaptation still remains largely unknown outside the field of evolutionary biology. The main purpose of this special section is to introduce the concept of exaptation to a broader audience, discuss its significance, and expose its contribution to the (possible) solution of long-standing, yet unresolved, questions about the emergence of novelty, particularly radical innovation.

This symposium consists of four papers that explore the value underpinning of market categories. These four papers are grouped into two interconnected themes. The symposium starts with a discussion...

This symposium will showcase contemporary research on creative industries and cultural markets, focusing on the different ways that management scholars and sociologists study outcomes in this domai...

Building on Penrose’s intuition about unused services as the engine of firms’ growth, we focus on technology resources and measure the potential of technology resources to generate unused services....