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From transaction to transformation costs: The case of Polaroid's SX-70 camera

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  • Garud, Raghu
  • Munir, Kamal

Abstract

Innovation in a product's design can have significant implications for the organization of competencies across a production network. Currently, discussions on product designs and the distribution of competencies across production networks are based on transaction costs considerations. However, such a view does not consider the transformation costs that arise when competencies across a production network are reorganized because of design changes. We explore the nature of these costs by examining the dynamics associated with Polaroid Corporation's greatest innovation, the SX-70 camera. Our longitudinal study suggests that it is not costless to redraw the boundaries of a firm. In the SX-70 camera case, Polaroid's relationships with its important stakeholders were adversely affected resulting in a deterioration of its competitive position. From this study, we suggest that it is critical to consider the transformation costs involved with radical innovations in order to gain a more complete picture of change in systemic industries.

Suggested Citation

  • Garud, Raghu & Munir, Kamal, 2008. "From transaction to transformation costs: The case of Polaroid's SX-70 camera," Research Policy, Elsevier, vol. 37(4), pages 690-705, May.
    • Handle: RePEc:eee:respol:v:37:y:2008:i:4:p:690-705
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    References listed on IDEAS

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    8. Clayton M. Christensen & Rory McDonald & Elizabeth J. Altman & Jonathan E. Palmer, 2018. "Disruptive Innovation: An Intellectual History and Directions for Future Research," Journal of Management Studies, Wiley Blackwell, vol. 55(7), pages 1043-1078, November.
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