Complementary Assets as Pipes and Prisms: Innovation Incentives and Trajectory Choices

Brian Wu, University of Michigan, Ann Arbor, Zhixi Wan, University of Illinois at Urbana-Champaign, Daniel A. Levinthal, Wharton School, University of Pennsylvania

Strategic Management Journal, Vol. 35, No. 9 (Sep 2014): 1257-1278

Abstract: The issue of the failure of incumbent firms in the face of radical technical change has been a central question in the technology strategy domain for some time. We add to prior contributions by highlighting the role a firm’s existing set of complementary assets have in influencing its investment in alternative technological trajectories. We develop an analytical model that considers firm heterogeneity with respect to both technological trajectories and complementary assets. Complementary assets play a dual role in incumbents’ investment behavior toward radical technological change: they are not only resources (pipes) that can buffer firms from technology change, but also prisms through which firms view those changes, influencing both the magnitude of resources that should be invested and the trajectory to which these resources should be directed.

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