When incremental is imperative: tactical innovation in the in-vitro fertilization industry

This study examines which firms are likely to adopt and benefit from tactical innovation which we define as incremental technological innovation that confers limited performance benefits but does not carry significant adoption and implementation costs. There is an abundance of research in innovation and technology management on the topic of radical innovations but surprisingly few studies on the far more common case of incremental innovations. While we acknowledge that incremental innovation is unlikely to lead to sustainable competitive advantage and the development of new capabilities, we argue that it is nevertheless a useful tactic for two reasons. First, incremental innovation is helpful to firms that are competitive laggards by offering them at least temporary competitive relief and the opportunity to reevaluate and redirect their strategic efforts. Looking at the internal context, we follow received theory and identify underperforming firms as those in the middle of the size distribution in a market. Second, looking at the external context, we build on the finding that escalating rivalry pushes firms to pursue radical innovation—a course of action that is disruptive and on average deleterious to performance. Under stiffening competition, incremental innovation is a desirable tactic because it avoids the hazard of core change that accompanies radical innovation while simultaneously allowing the firm to appease stakeholders by demonstrating a proactive response to competition. We test these ideas and discuss their implications for received theory in the context of the artificial reproductive technology (in-vitro fertilization) industry in the United States between 1989 and 2001.