The emergence of radical technological regimes renders obsolete the value of incumbent firms’ existing competences and presents a significant challenge to their long-term sustainability. We explore when incumbents’ investments in radical technologies may facilitate adaptation and when they may succumb to the forces of organizational inertia. Our theoretical framework accounts for the possibility that incumbents may invest in new technologies through a variety of modes (internal research, external research contracts, research alliances and acquisitions) and that a radical technology may not conform to the incumbents’ prevailing business models. This lack of fit with the existing business model is an important source of organizational rigidity associated with the incumbent’s commercialization of new technologies. We consider how the different modes of pursuing a new technology differ in the extent to which they are shielded from incumbents’ inertial pressures. We argue that this difference helps explain why incumbents, despite investing in radical technologies, may still be unable to navigate technological change, and what types of investments will be more effective in achieving desired commercialization outcomes. Evidence from biopharmaceutical incumbents’ investments in Monoclonal Antibodies and Gene Therapy from 1989 to 2008 offers strong support for our framework.
Why do some new technologies emerge and immediately supplant incumbent technologies while others take years or decades to takeoff? We explore this question through a framework that weighs the emergence challenges that need to be overcome by a new technology against the extension opportunities that are available to the old technology. We consider both the focal competing technologies as well as the external technology ecosystems in which they are developed and used. We apply this framework to analyze ten episodes of technology competition that have occurred in the semiconductor lithography equipment industry from 1972 to 2009. The framework provides a robust explanation for the observed differences in the pace of substitution. We consider the implication of these findings for both firm strategy and R&D policy.
Scholars have long been interested in the reasons why firms exist, arguing that they have efficiency and productivity benefits over other approaches to organizing. We examine why entrepreneurs often form firms, since entrepreneurial ventures are not large enough to accrue any of the expected benefits from formality. Instead, we argue that there are reasons beyond efficiency (and regulation) that cause firms to exist. We suggest that an unrecognized implication of new institutional and ecological theory leads entrepreneurs to establish firms as a legitimating agent, and to allow them to act in industries with existing firm populations. We test this theory by examining a unique sample of crowd-funded startup companies, to empirically identify the advantages of formal versus informal organizations with different types of third party entities. We find that adopting the mantle of a formal organization helps entrepreneurs in contexts where they operate with other formal organizations, but not in interactions with other types of resource holders.
We conducted a follow-up survey of large design, technology, and video games projects that attempted to raise money using crowdfunding before mid-2012. We found that reward-based crowdfunding appears to be able to lead to and support traditional entrepreneurship. A very high percentage (over 90%) of successful projects remained ongoing ventures 1-4 years after their campaign. We found that 32% of all these reported yearly revenues of over $100,000 a year since the Kickstarter campaign, and added an average of 2.2 employees per successful project. The survey also suggested that crowdfunding provided many potential benefits beyond the crowdfunded money itself to successful creators, including helping provide access to customers, press, employees, and outside funders. Consistent with other research, many projects were delayed for a variety of reasons, and 37% went over budget. We also analyze the factors that lead to longer-term crowdfunding success.