Session 58

Innovation and competitive strategy

Track E

Date: Tuesday, October 9, 2012

 

Time: 11:00 – 12:15

Common Ground

Room: Terrace 1


Facilitator:

  • Lyda Bigelow, University of Utah

Title: And Then There Were Three: The Impact of Multiple Corporate Investors on Innovative Outcomes

Authors

  • Gary Dushnitsky, London Business School
  • Sheryl Winston Smith, Temple University

Abstract: Entrepreneurial ventures are increasingly funded by established firms who seek a 'window on novel technologies'. As Corporate Venture Capital (CVC) investment is more prevalent the practice has given rise to ventures being backed by multiple CVC investors. Why would an established firm co-invest with a competitor and risk sharing the learning potential? We expand on existing innovation studies, and investigate learning objectives combined with product-market considerations. A sample of CVC investments in the medical device industry (1978-2007) affords a unique opportunity to test the expansive framework: in this industry one can systematically observe learning (i.e., patenting) and product-market (i.e., FDA's Pre-Market Approvals) outcomes. We find that co-investment is mostly consistent with product-market considerations: co-investors introduce more innovative products compared to firms that forego investment, yet the benefits are eroded for a firm that joins the investment syndicate later.

Title: Competitive Effects of Modern Patent Pools: The Effect of the MPEG-2 Pool on Outsiders’ Performance

Authors

  • Keyvan Vakili, London Business School

Abstract: Prevailing theories generally suggest that modern patent pools are pro-competitive, yet little empirical work has been done to examine the competitive effects of these pools. I address this gap by analyzing the effect of MPEG-2 pool formation on the innovative performance of two outside groups: firms with complementary technological knowledge and firms with competing technical knowledge. The preliminary results show that MPEG-2 pool formation had a substantial negative impact on the innovation rate of these two groups using difference-in-difference methodology. The results also suggest that the innovation rate decline in both groups can be explained by a shift in firm investment from technological inventions to pool technology implementation. Increased litigation risk and increased competition intensity after pool formation are unable to explain the effect.

Title: Diffusion of Innovation in Platform-based Markets: Role of the Platform Owner and its Competitive Consequences

Authors

  • Dmitry Sharapov, Imperial College London

Abstract: A growing literature in strategic management on competitive interactions within and between platform-based markets has so far largely neglected the role of the platform owner in the diffusion of innovation in such markets. I examine the choices facing a platform owner regarding the dissemination of information about complementor performance and argue that these choices differentially affect the value appropriation potential of incumbent versus new entrant complementors, with a more active platform owner role in the dissemination of information benefiting incumbent complementors while being detrimental to new entrants. This difference in the ability to appropriate the returns to innovation will in turn affect the innovativeness of products provided by complementors to the platform, thus affecting the ability of a focal platform to compete against rival platforms.

Title: Incubation of Innovation Ecosystems in Nascent Industries: The Role of Pre-Investment Capabilities in Value Capture

Authors

  • Mahka Moeen, University of North Carolina
  • Rajshree Agarwal, University of Maryland

Abstract: We focus on the incubation stage — period between introduction of a technological discovery and the first instance of its commercialization — of industry evolution, and the investments in capability development by heterogeneous firms. We examine the effect of a firm’s pre-investment capabilities on its ecosystem development and type of value capture — commercialization of product vs. support role in ecosystem. While technological capabilities and complementary assets are relevant, we highlight the importance of prior integrative capabilities in effective creation of innovation ecosystem through knowledge integration across partners and capabilities, and the likelihood of product commercialization. The empirical context is a comprehensive sample of firms that invested in plant biotechnology between 1985 and 2010.

Title: Patent Litigation as Factor Market Rivalry

Authors

  • Peter Gianiodis, Duquesne University
  • Gideon Markman, Colorado State University
  • Ann Buchholtz, Rutgers University

Abstract: Most rivalry studies take a product-market view, and assume some level of symmetry in firm’s size, operational scope, and competitive contexts. This study broadens the definition of rivalry by redirecting attention to rivalry in factor markets. Using ten years of data on infringement lawsuits to operationalize factor market rivalry, we show how firm size, resource positions, and long- and short-term inter-firm partnerships affect one form of factor market rivalry, patent litigation. We also determine the extent to which firms are vulnerable to attacks (i.e. patent litigation) by unexpected rivals. Results suggest that greater attention to factor market rivalry might help firms to defend resource positions better and to lodge more effective offenses along rivals’ entire value chain - including, but not limited to, product markets.

Title: Real Options Logic Revisited: Disentangling Sequential Investment, Low-Commitment Strategies, and Resource Re-Allocation Reality

Authors

  • Ronald Klingebiel, Frankfurt School of Finance and Management
  • Ron Adner, Dartmouth College

Abstract: Real options logic constitutes a powerful resource allocation rationale but its validation has provided a challenge. Our paper examines the performance effect of the characteristics of real options logic: sequential investment, low commitment, and resource re-allocation. Using the context of product innovation, we find that sequential resource allocation increases performance. Low commitment and re-allocation have insignificant effects, which we explain with escalating commitment and the ramifications of project discontinuations, respectively. Appropriate fit between low-commitment and re-allocation, however, proves strongly advantageous for performance, especially for firms that invest sequentially. Our findings demonstrate that it is only the concomitance of the three features that provides sufficient evidence of real options logic. We contribute to the recent debate on the utility of options perspectives for explaining performance heterogeneity.

All Sessions in Track E...

Sun: 08:00 – 09:15
Session 270: New Frontiers in the Computational Approaches to Strategy and Organization
Sun: 09:30 – 10:45
Session 271: Competing for Innovation
Sun: 11:15 – 12:30
Session 272: Unified Theory of Industry Evolution
Sun: 15:15 – 16:30
Session 52: Networks and competition
Session 66: Competitive strategies in transition
Mon: 08:00 – 09:15
Session 55: Risk, uncertainty and competitive advantage
Session 64: Diverse strategies: Diversification and the evolution of competition
Mon: 09:30 – 10:45
Session 65: Resourceful competitors: Competitive strategies and the resource based view
Mon: 13:30 – 14:45
Session 54: The dynamics of dynamic capabilities
Mon: 16:30 – 17:45
Session 57: Finding your niche: Niche Strategies and Competitive Advantage
Session 245: Competitors, strategy, and competitive dynamics
Tue: 08:00 – 09:15
Session 56: Competitive dynamics meet competitive strategy
Session 254: Capital Markets and Efficiency
Tue: 11:00 – 12:15
Session 58: Innovation and competitive strategy
Tue: 14:15 – 15:30
Session 60: The sustainability of competitive advantage
Session 61: Value creation and value capture
Tue: 15:45 – 17:00
Session 62: Acquiring competitive success? Mergers and acquisitions
Tue: 17:30 – 18:45
Session 59: Tempus fugit? Competitive strategy over time


Strategic Management Society

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