Stock of downstream complementary assets as a catalyst for product innovation during technological change in the U.S. machine tool industry

• Author: Susan K. Cohen,Raja Roy
• DOI: http://doi.org/10.1002/smj.2557
• Published date: 01 June 2017
• Date: 01 June 2017

Strategic Management Journal

Strat. Mgmt. J.,38: 1253–1267 (2017)

Published online EarlyView 24 October 2016 in WileyOnline Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2557

Received 18 September 2014;Final revision received31 May 2016

STOCK OF DOWNSTREAM COMPLEMENTARY

ASSETS AS A CATALYST FOR PRODUCT INNOVATION

DURING TECHNOLOGICAL CHANGE IN THE U.S.

MACHINE TOOL INDUSTRY

RAJA ROY1*and SUSAN K. COHEN2

1College of Business and Management, Northeastern Illinois University, Chicago,

Illinois, U.S.A.

2Organizations & Entrepreneurship, Katz Graduate School of Business, University of

Pittsburgh, Pittsburgh, Pennsylvania, U.S.A.

Research summary: Weinvestigate the effect of incumbents’ stock of downstream complementary

assets on their product innovation during a disruptive technological change. We theorize that a

rm’s stock of downstreamcomplementary assets, by providing critical information about shifting

demand conditions, will play a catalytic role in rm adaptation during such a change. Using the

advent of disruptive computer numerical control machine tools in the U.S. machine tool industry

during the 1970s and 1980s as the context, we nd that rms with greater stocks of downstream

complementary assets are likely to be product innovation leaders during sucha change.

Managerial summary: Disruptive changes are challenging rms across industries. We concen-

trate on the U.S. machine tool industry during the 1970s and 1980s when Japanese manufacturers

with disruptive computer numerical control systems challenged the U.S. manufacturers. We nd

that, under the threat of disruption, the greater the stock of downstream complementary assets a

U.S. machine tool manufacturer has, the morelikely it is to be the product innovation leader with

the disruptive technology. Our ndings provide novel insights for managers in companies that

face disruptive changes and can help them avoid the consequences of such changes as predicted

by prior research. Copyright © 2016 John Wiley & Sons, Ltd.

INTRODUCTION

The importance of complementary assets in shap-

ing innovators’ and incumbents’ fortunes during a

technological change has captivated strategy schol-

ars for almost three decades. In his seminal paper,

Teece (1986: 288) highlighted that complementary

assets— the assets dedicated to “marketing,

competitive manufacturing, and after-sales

support”— helped the possessor appropriate

Keywords: disruptive change; product innovation; com-

plementary assets

*Correspondence to: Raja Roy, Assistant Professor Manage-

ment and Marketing Department Northeastern Illinois Univer-

sity, 5500 North St. Louis Avenue, Chicago, IL 60625. E-mail:

rroy@neiu.edu

Copyright © 2016 John Wiley & Sons, Ltd.

value created by its products. Subsequent research

illustrates that such assets buffer incumbents when

technologies change, affording them more time

to adapt their products and processes (Hill and

Rothaermel, 2003; Mitchell, 1989; Tripsas, 1997)

and affecting their choices in an emerging industry

(Kapoor and Furr, 2015). Recently,Wu et al. (2014:

4) underscored that an incumbent’s “stock of

complementary assets” can affect its investments

in alternative technology trajectories.

Following Teece’s footsteps, we dene down-

stream complementary assets (DCAs)— the focus

of our article— as those assets that are used in “sales

and distribution” of a product (Teece, 1988: 266)

and in providing “training, support, and servicing”

to customers (Teece, 1986: 298). Literature