IDEAS home Printed from https://ideas.repec.org/a/inm/ororsc/v25y2014i3p653-669.html
   My bibliography  Save this article

Paradigm-Changing vs. Paradigm-Deepening Innovation: How Firm Scope Influences Firm Technological Response to Shocks

Author

Listed:
  • Gautam Ahuja

    (Stephen M. Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109)

  • Curba Morris Lampert

    (College of Business, Florida International University, Miami, Florida 33199)

  • Vivek Tandon

    (NUS Business School, National University of Singapore, Singapore 119245)

Abstract

We examine the direction of firms’ research efforts as they respond to the shock of a sharp increase in the price of a key input. In terms of direction, firms can respond to this shock with paradigm-changing investments that develop technologies to use substitute inputs or with paradigm-deepening investments that develop technologies to improve the utilization efficiency of the existing input. We develop a framework that suggests that firms’ emphasis on paradigm-changing versus paradigm-deepening investments depends on the degree of input-relatedness across their businesses. We test our hypotheses by examining the responses of large manufacturing firms in the United States to the oil shock of the early 1980s. Our framework predicts and our results show that the more related a firm’s businesses are, the larger its investments into paradigm-changing technologies are and the smaller its investments into paradigm-deepening technologies in response to the oil shock are. We identify the implications of these findings for technological evolution and diversification literatures.

Suggested Citation

  • Gautam Ahuja & Curba Morris Lampert & Vivek Tandon, 2014. "Paradigm-Changing vs. Paradigm-Deepening Innovation: How Firm Scope Influences Firm Technological Response to Shocks," Organization Science, INFORMS, vol. 25(3), pages 653-669, June.
    • Handle: RePEc:inm:ororsc:v:25:y:2014:i:3:p:653-669
    DOI: 10.1287/orsc.2013.0867
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/orsc.2013.0867
    Download Restriction: no
    File URL: https://libkey.io/10.1287/orsc.2013.0867?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Tobias Kretschmer & Phanish Puranam, 2008. "Integration Through Incentives Within Differentiated Organizations," Organization Science, INFORMS, vol. 19(6), pages 860-875, December.
    2. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    3. James A. Robins & Margarethe F. Wiersema, 2003. "The measurement of corporate portfolio strategy: analysis of the content validity of related diversification indexes," Strategic Management Journal, Wiley Blackwell, vol. 24(1), pages 39-59, January.
    4. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107, Elsevier.
    5. Charles W. L. Hill & Michael A. Hitt & Robert E. Hoskisson, 1992. "Cooperative Versus Competitive Structures in Related and Unrelated Diversified Firms," Organization Science, INFORMS, vol. 3(4), pages 501-521, November.
    6. Park, Se-Hark & Labys, Walter C., 1994. "Divergences in manufacturing energy consumption between the North and the South," Energy Policy, Elsevier, vol. 22(6), pages 455-469, June.
    7. Sahal, Devendra, 1981. "Alternative conceptions of technology," Research Policy, Elsevier, vol. 10(1), pages 2-24, January.
    8. David Popp, 2006. "They Don'T Invent Them Like They Used To: An Examination Of Energy Patent Citations Over Time," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(8), pages 753-776.
    9. Constance E. Helfat, 1994. "Evolutionary Trajectories in Petroleum Firm R&D," Management Science, INFORMS, vol. 40(12), pages 1720-1747, December.
    10. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    11. Robert E. Hoskisson & Michael A. Hitt, 1988. "Strategic control systems and relative r&d investment in large multiproduct firms," Strategic Management Journal, Wiley Blackwell, vol. 9(6), pages 605-621, November.
    12. David J. Teece, 2003. "Towards an Economic Theory of the Multiproduct Firm," World Scientific Book Chapters, in: Essays In Technology Management And Policy Selected Papers of David J Teece, chapter 15, pages 419-446, World Scientific Publishing Co. Pte. Ltd..
    13. Paul Nightingale, 2008. "Meta-paradigm change and the theory of the firm," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(3), pages 533-583, June.
    14. Linda F. Tegarden & Donald E. Hatfield & Ann E. Echols, 1999. "Doomed from the start: what is the value of selecting a future dominant design?," Strategic Management Journal, Wiley Blackwell, vol. 20(6), pages 495-518, June.
    15. Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1999. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 941-975.
    16. Blundell, Richard & Griffith, Rachel & Van Reenen, John, 1995. "Dynamic Count Data Models of Technological Innovation," Economic Journal, Royal Economic Society, vol. 105(429), pages 333-344, March.
    17. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    18. Ashish Arora & Alfonso Gambardella, 2010. "Ideas for rent: an overview of markets for technology," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(3), pages 775-803, June.
    19. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    20. Nathan Rosenberg, 1975. "Problems in the Economist's Conceptualization of Technological Innovation," History of Political Economy, Duke University Press, vol. 7(4), pages 456-481, Winter.
    21. David J. Teece, 2008. "Dosi's technological paradigms and trajectories: insights for economics and management," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(3), pages 507-512, June.
    22. Kenneth N. M. Dundas & Peter R. Richardson, 1982. "Implementing the unrelated product strategy," Strategic Management Journal, Wiley Blackwell, vol. 3(4), pages 287-301, October.
    23. Gilsing, Victor & Nooteboom, Bart, 2006. "Exploration and exploitation in innovation systems: The case of pharmaceutical biotechnology," Research Policy, Elsevier, vol. 35(1), pages 1-23, February.
    24. Liu, Yucan & Shumway, C. Richard, 2009. "Induced innovation and marginal cost of new technology," Economics Letters, Elsevier, vol. 105(1), pages 106-109, October.
    25. Nicholas S. Argyres & Brian S. Silverman, 2004. "R&D, organization structure, and the development of corporate technological knowledge," Strategic Management Journal, Wiley Blackwell, vol. 25(8‐9), pages 929-958, August.
    26. Richard R. Nelson, 1959. "The Simple Economics of Basic Scientific Research," Journal of Political Economy, University of Chicago Press, vol. 67(3), pages 297-297.
    27. Sahal, Devendra, 1985. "Technological guideposts and innovation avenues," Research Policy, Elsevier, vol. 14(2), pages 61-82, April.
    28. Giovanni Dosi, 2000. "Sources, Procedures, and Microeconomic Effects of Innovation," Chapters, in: Innovation, Organization and Economic Dynamics, chapter 2, pages 63-114, Edward Elgar Publishing.
    29. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
    30. Vasudevan Ramanujam & P. Varadarajan, 1989. "Research on corporate diversification: A synthesis," Strategic Management Journal, Wiley Blackwell, vol. 10(6), pages 523-551, November.
    31. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    32. Ruttan, Vernon W, 1997. "Induced Innovation, Evolutionary Theory and Path Dependence:," Economic Journal, Royal Economic Society, vol. 107(444), pages 1520-1529, September.
    33. Alonso-Borrego, César & Forcadell, Francisco Javier, 2010. "Related diversification and R&D intensity dynamics," Research Policy, Elsevier, vol. 39(4), pages 537-548, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lin, Yiling & Evans, James A. & Wu, Lingfei, 2022. "New directions in science emerge from disconnection and discord," Journal of Informetrics, Elsevier, vol. 16(1).
    2. Adrian Lüthge, 2020. "The concept of relatedness in diversification research: review and synthesis," Review of Managerial Science, Springer, vol. 14(1), pages 1-35, February.
    3. Tang Wang & Vikas A. Aggarwal & Brian Wu, 2020. "Capability interactions and adaptation to demand‐side change," Strategic Management Journal, Wiley Blackwell, vol. 41(9), pages 1595-1627, September.
    4. Sun, Jinyun & Maksimov, Vladislav & Wang, Stephanie Lu & Luo, Yadong, 2021. "Developing compositional capability in emerging-market SMEs," Journal of World Business, Elsevier, vol. 56(3).
    5. Choi, Sukwoong & Kim, Wonjoon & Kim, Namil, 2022. "International alliance formations: The role of brokerage in technology competition networks," Journal of Business Research, Elsevier, vol. 144(C), pages 440-449.
    6. Tonoyan, Vartuhi & Boudreaux, Christopher J., 2023. "Gender diversity in firm ownership: Direct and indirect effects on firm-level innovation across 29 emerging economies," Research Policy, Elsevier, vol. 52(4).
    7. Najoung Lim & Seojin Kim & Rajshree Agarwal, 2023. "Weathering a demand shock: The impact of prior vertical scope on post‐shock firm response," Strategic Management Journal, Wiley Blackwell, vol. 44(8), pages 1965-2004, August.
    8. Chen, Jiyao & Shao, Diana & Fan, Shaokun, 2021. "Destabilization and consolidation: Conceptualizing, measuring, and validating the dual characteristics of technology," Research Policy, Elsevier, vol. 50(1).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dosi, Giovanni & Nelson, Richard R., 2010. "Technical Change and Industrial Dynamics as Evolutionary Processes," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 51-127, Elsevier.
    2. Sharon Belenzon & Tomer Berkovitz, 2010. "Innovation in Business Groups," Management Science, INFORMS, vol. 56(3), pages 519-535, March.
    3. Dibiaggio, Ludovic & Nasiriyar, Maryam & Nesta, Lionel, 2014. "Substitutability and complementarity of technological knowledge and the inventive performance of semiconductor companies," Research Policy, Elsevier, vol. 43(9), pages 1582-1593.
    4. Bastian Rake, 2017. "Determinants of pharmaceutical innovation: the role of technological opportunities revisited," Journal of Evolutionary Economics, Springer, vol. 27(4), pages 691-727, September.
    5. Wadhwa, Anu & Phelps, Corey & Kotha, Suresh, 2016. "Corporate venture capital portfolios and firm innovation," Journal of Business Venturing, Elsevier, vol. 31(1), pages 95-112.
    6. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
    7. Giovanni Dosi & Richard Nelson, 2013. "The Evolution of Technologies: An Assessment of the State-of-the-Art," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 3-46, June.
    8. Dario Guarascio & Mario Pianta & Francesco Bogliacino, 2017. "Export, R&D and New Products: A Model and a Test on European Industries," Economic Complexity and Evolution, in: Andreas Pyka & Uwe Cantner (ed.), Foundations of Economic Change, pages 393-432, Springer.
    9. Katila, Riitta & Mang, Paul Y., 2003. "Exploiting technological opportunities: the timing of collaborations," Research Policy, Elsevier, vol. 32(2), pages 317-332, February.
    10. Stefano Breschi, 2000. "The Geography of Innovation: A Cross-sector Analysis," Regional Studies, Taylor & Francis Journals, vol. 34(3), pages 213-229.
    11. Dario Diodato & Andrea Morrison, 2019. "Technological regimes and the geography of innovation: a long-run perspective on US inventions," Papers in Evolutionary Economic Geography (PEEG) 1924, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jul 2019.
    12. Arbussà, Anna & Coenders, Germà, 2005. "Innovation strategies in the presence of technology markets: evidence from Spanish innovative firms," Working Papers of the Department of Economics, University of Girona 15, Department of Economics, University of Girona.
    13. Emmanuel Dechenaux & Brent Goldfarb & Scott Shane & Marie Thursby, 2008. "Appropriability and Commercialization: Evidence from MIT Inventions," Management Science, INFORMS, vol. 54(5), pages 893-906, May.
    14. Uwe Cantner, 2017. "Foundations of Economic Change: An Extended Schumpeterian Approach," Economic Complexity and Evolution, in: Andreas Pyka & Uwe Cantner (ed.), Foundations of Economic Change, pages 9-49, Springer.
    15. Keld Laursen & Solon Moreira & Toke Reichstein & Maria Isabella Leone, 2017. "Evading the Boomerang Effect: Using the Grant-Back Clause to Further Generative Appropriability from Technology Licensing Deals," Organization Science, INFORMS, vol. 28(3), pages 514-530, June.
    16. Herman, Kyle S. & Xiang, Jun, 2019. "Induced innovation in clean energy technologies from foreign environmental policy stringency?," Technological Forecasting and Social Change, Elsevier, vol. 147(C), pages 198-207.
    17. Lynn Wu & Bowen Lou & Lorin Hitt, 2019. "Data Analytics Supports Decentralized Innovation," Management Science, INFORMS, vol. 65(10), pages 4863-4877, October.
    18. Mickey Folkeringa & Andre van Stel & Joris Meijaard, 2005. "Innovation, strategic renewal and its effect on small firm performance," Papers on Entrepreneurship, Growth and Public Policy 2005-36, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    19. Scott Shane, 2001. "Technology Regimes and New Firm Formation," Management Science, INFORMS, vol. 47(9), pages 1173-1190, September.
    20. repec:hal:spmain:info:hdl:2441/43aq8ffdqb82sbffkv69bt1eaa is not listed on IDEAS
    21. Peter G. Klein & Robert Wuebker, 2020. "Corporate diversification and innovation: Managerial myopia or inefficient internal capital markets?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1403-1416, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ororsc:v:25:y:2014:i:3:p:653-669. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.