When Big Firms Are Most Likely to Innovate
— October 19, 2016
By J.P. Eggers and Aseem Kaul
In our research, we argue that it’s neither reluctance to pursue new technologies nor inability to think in new ways that limits established firms from developing new technologies. Rather, it’s when and where they choose to pursue such innovations that may sometimes be the problem. On the one hand, firms are most likely to pursue path-breaking innovation when their technological performance has fallen below their expectations. A firm that’s outcompeting its rivals may see no need to try something radically new; one that’s falling behind may be eager to look for a big breakthrough, especially if its performance is just slightly below expectations, so a big new discovery could push it over the hump.
On the other hand, attempts to develop path-breaking new technologies are most likely to succeed when undertaken from positions of existing strength. Organizations tend to perform better when they have strong capabilities—better scientists and engineers, effective product development processes, and strong brand names—and these advantages are not only likely to persist over time, they are also likely to be helpful even when pursuing more radical inventions. The better you understand the possibilities and limits of the old technology, the better chance you have of combining it with more distant knowledge to develop something really new.
Read the full article as published in the Harvard Business Review.
J.P. Eggers is an Associate Professor of Management and Organizations.