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1InternationalJournalofInnovationManagementVol.8,No.1(March2004)pp.000–000©ImperialCollegePressORGANISATIONALRESPONSESTODISCONTINUOUSINNOVATION:ACASESTUDYAPPROACHJEFFREYT.MACHERMcDonoughSchoolofBusiness,GeorgetownUniversityWashington,DC20057,USAjtm4@georgetown.eduBARAKD.RICHMANDukeUniversitySchoolofLawBox90360,Durham,NC27708-0360,USArichman@law.duke.eduReceived29July2003Revised24December2003Accepted5January2004Researchthatexaminesentrant-incumbentdynamicsoftenpointstotheorganisationallimitationsthatconstrainincumbentsfromsuccessfullypursuingnewtechnologiesorfendingoffnewentrants.Someincumbentsareneverthelessabletosuccessfullyimplementorganisationalstructuresanddeveloproutinesthatovercometheseinstitutionalconstraints.Weprovideacase-studyanalysisofhowthreefirms—Motorola,IBMandKodak—respondedto“discontinuous”innovationsandtheassociatedstructuralandorganisationallimitationsthataretypicaltoincumbentorganisations.Eachfirmwasabletocapturegainsfromnewtechnologiesanddevelopprofitableproductsinemergingmarkets,althoughtheirabilitiestosustainthesegainsvariedduetosubsequentorganisationalchanges.Drawingfromthesecasestudies,wesynthesisehowfirmscaninstituteorganisationalstrategiestocontinuetocapturegainsfromdisruptiveinnovations.Aschemasuggeststhatparticularorganisationalstrategiesarecomparativelyoptimalforcorrespondingpointsalonganinnovationlifecycle.Keywords:Architectural/radicalinnovation;entrant-incumbentcompetition;managementoftechnology.IntroductionTechnologicalchangeoftenpitsentrantfirmsagainstwell-establishedincumbentfirmsformarketandtechnologicalleadership.Intheliteraturethatexploresthis00093.p6502/05/2004,5:05PM12J.T.Macher&B.D.Richmandynamic,researcherspointtothedecliningperformanceofincumbentsinthefaceofradical(AbernathyandUtterback,1978;CooperandSchendel,1976)andarchitectural(HendersonandClark,1990)innovation.Entrantswinthemajorityofthesetechnologicalbattlesdespiteincumbents’obviousadvantagesinresources,experience,andotherimportantfactors(Teece,1986).Thepersistentfailuresofincumbentshaveledsomescholarstoemphasisetherolesthatorganisationalinertia(HannanandFreeman,1984),highlystructuredroutines(NelsonandWinter,1982)andabsorptivecapacity(CohenandLevinthal,1990)playinconstrainingtheactionsandultimatesuccessofincumbents.Thoughtful(andrelated)frameworkshavebeendevelopedthatexplainhowandwhyincumbentleadershipunderonetechnologicalparadigmdoesnotalwaystranslateinto—andinsomecasesisadetrimentfor—successinsubsequentparadigms(AndersonandTushman,1990;HendersonandClark,1990).Bycontrast,theobservablerepeatedsuccessofmarketentrantshasledotherstoarticulateanattacker’sadvantage(ChristensenandRosenbloom,1995;Foster,1986).Inthisapproach,entrantfirmsarearguedbettersuitedthanincumbentfirmstodevelopingandcommercialisingemergingtechnologiesbecauseoftheirsmallersize,shorter(path-dependent)histories,andmorelimitedcommitmentstovaluenetworksandcurrenttechnologicalparadigms.Althoughtheinnovationliteraturehasmadesignificantprogressinexplainingwhyincumbentfirmsfacegreaterdifficultiesadjustingto“discontinuous”innovations,andcorrespondingly,whyentrantfirmsfacethesedifficultiestoalesserextent,farlessisknownhowcertainincumbentfirmshavebeenabletobuckthispattern.Tobesure,someincumbentfirmshavesuccessfullyadaptedandrespondedtodiscontinuousinnovations,andeitherrecapturedtheirpreviousmarketortechnologicalpositionsorremainedthedefactoleaders(AhujaandLampert,2001;HillandRothaermel,2003;Metheetal.,1997;RosenbloomandChristensen,1998;Rothaermel,2001).Thispaperaddstothisresearchstreambyinvestigatinghowincumbentfirmshavesuccessfullyrespondedtotechnologicaldiscontinuitiesandhavemaintainedleadershipaftertheintroductionofthesenewtechnologiesviatheirimplementationofparticularorganisationalapproaches.Weanalysetheseincumbent“successstories”throughdetailedexaminationsofthreecasestudies,whichdelineatetheorganisationalapproachesthatincumbentfirmstookinrespondingtotheemergenceof“discontinuous”innovationsthathadthepotentialtounseattheirmarketandtechnologicalleadershippositions.Bydiscontinuousinnovation,werefertothoseinnovationsthatgeneratemarketand/ortechnologicaldiscontinuitiesandsubsequentlyaffectincumbentfirms’abilitiestoadaptandrespondtothesechanges.Inourapproach,webuilduponorganisationaltheoryexplanations(CohenandLevinthal,1990;HannanandFreeman,1984;NelsonandWinter,1982)of00093.p6502/05/2004,5:05PM2OrganisationalResponsestoDiscontinuousInnovation3incumbentfailureandentrant-incumbentmodels(Christensen,1997;ChristensenandRosenbloom,1995;HendersonandClark,1990;TushmanandAnderson,1986)toarticulatehowsomeincumbentfirmsareabletosurvivetheemergenceofradicalandarchitecturalinnovations.Thesignificanceofourapproachliesinouridentificationofparticularorganisationalstrategiesthatwereimplementedbyfirmsindifferentindustriesthatconfrontedtechnologicalthreats.Sincetheabovetheoreticalmodelsandframeworkshaveseenmorelimitedapplicationinexplainingincumbentsuccessstories,thefindingsfromourcasestudiesillustratesomenewandpotentialapplications.Thispaperisneitheranattempttogeneralisehowi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