When dinosaurs fly: The role of firm capabilities in the ‘avianization’ of incumbents during disruptive technological change

• Author: Irina Stoyneva,Curba M. Lampert,Raja Roy
• DOI: http://doi.org/10.1002/sej.1278
• Published date: 01 June 2018
• Date: 01 June 2018

RESEARCH ARTICLE

When dinosaurs fly: The role of firm capabilities

in the ‘avianization’of incumbents during

disruptive technological change

Raja Roy

1

| Curba M. Lampert

2

| Irina Stoyneva

3

1

Martin Tuchman School of Management,

New Jersey Institute of Technology, Newark,

New Jersey

2

Department of Management and

International Business, College of Business,

Florida International University, Miami, Florida

3

Kanbar College of Design, Engineering and

Commerce, Philadelphia University,

Philadelphia, Pennsylvania

Correspondence

Raja Roy, Martin Tuchman School of

Management, New Jersey Institute of

Technology, 4025 Central Avenue Building,

Newark, NJ 07102.

Email: rroy@njit.edu

Research Summary: Prior research suggests that large incumbents

will become victims of disruptive technological change. We inves-

tigate the image sensor industry in which the emergence of CMOS

sensors challenged the manufacturers of CCD sensors. Although

this disruptive technological change led to the demise of CCD

technology, it also led to avianization—or strategic renewal—for

some incumbents, similar to how some dinosaurs survived the

mass Cretaceous-Tertiary extinction by evolving into birds. We

find that CCD manufacturers that did avianize were preadapted to

the disruptive CMOS technology in that they possessed relevant

complementary technologies and access to in-house users that

allowed them to strategically renew themselves.

Managerial Summary: We investigate the transition from CCD to

CMOS image sensors in the digital image sensor industry.

Although the emergence of CMOS sensors was disruptive to CCD

sensors, we find that CCD sensor manufacturers such as Sony and

Sharp successfully transitioned to manufacturing CMOS sensors.

Contrary to popular press and prior academic research characteriz-

ing disruptive change as being a source of failure for large firms,

our research reveals that firms that possess relevant complemen-

tary technologies and have access to in-house users are able to

strategically renew themselves in the face of a disruptive threat.

KEYWORDS

complementary technologies, disruptive change, image sensors,

in-house users, strategic renewal, technological change

1|INTRODUCTION

One of the “truisms”(Taylor & Helfat, 2009) in the innovation literature is that incumbent firms struggle during radi-

cal technological changes. Researchers have noted that such changes often lead to the emergence of new product

Received: 12 November 2015 Revised: 8 May 2017 Accepted: 26 June 2017 Published on: 5 March 2018

DOI: 10.1002/sej.1278

Copyright © 2017 Strategic Management Society

Strategic Entrepreneurship Journal. 2018;12:261–284. wileyonlinelibrary.com/journal/sej 261

markets with novel product performance features (Tushman & Anderson, 1986). Prior research underscores that

preexisting competencies (Henderson & Clark, 1990), inability to master new capabilities (Dosi, 1982; Tushman &

Anderson, 1986), managerial beliefs (Benner & Tripsas, 2012), and firm incentives (Christensen, 1997) create inertia

for incumbents.

Literature, however, also provides evidence contrary to this dismal prediction for incumbent firms. Building on

Teece’s (1986, p. 288) seminal work suggesting the importance of complementary assets (those dedicated to “mar-

keting, competitive manufacturing, and after-sales support”), Mitchell (1989), Tripsas (1997), and others have under-

scored the importance of such assets as buffers for incumbents during technological changes (Danneels, 2004;

Hill & Rothaermel, 2003). Additionally, scholars have theorized that complementary assets often play a more proac-

tive role, acting as catalysts for product innovation during technological transitions (Helfat, 1997; Taylor & Helfat,

2009; Wu, Wan, & Levinthal, 2014).

Building on this stream of research, scholars highlight the importance of possessing a specific type of comple-

mentary asset—complementary technologies (CTs)—in value creation and preadaptation (Cattani, 2006) for incum-

bent firms. Recent explorations of the role of CTs (e.g., Anderson & Parker, 2013; Funk, 2013; Makri, Hitt, &

Lane, 2010) build on rich evidence in the literature that draws attention to the critical role of these technologies

in the emergence of new product and process innovations, such as the Toyota (or Just-in-Time) production sys-

tems (Ayres, 1991). These studies support Henderson’s (1995, p. 641) observation that CTs such as “production

control techniques, better resist systems and finer control of alignment technology”shifted the “natural”limits

(Sahal, 1985) in the evolution of optical lithography aligners. Consistently, Cattani (2006, p. 306) noted that

knowledge of relevant CTs, such as electronics acquired from manufacturing optical fibers for medical and military

applications, helped Corning “gain valuable experience”in the transition to optical fibers for telecommunication,

despite the manufacturing methods being “significantly different.”Further, Funk (2013, p. 143) recently

highlighted that CTs helped VHS and Betamax video recorder manufacturers improve the “magnetic recording

density”of their products. Despite the increasing attention that CTs have received in recent years, relatively

underexplored is if and how the possession of relevant CTs

1

influences incumbent firms’responses during tech-

nological changes.

Innovation research also highlights that in addition to the upstream complementary assets, understanding user

needs is a critical firm-level capability necessary for introducing new product innovations. In his formative paper,

Teece (1992, p. 9) notes that “[a] salient aspect of innovation is that it requires a close coupling of the developer of

the new technology to the user. Commercially successful innovations require linking scientific, engineering, entre-

preneurial, and management skills with an intimate understanding of user needs.”Research emphasizes that under-

standing user needs becomes particularly important in high technology industries where “the world moves…rapidly”

(von Hippel, 1986, p. 796). Most recently, Roy and Sarkar (2016), building on Teece’s (1992, p. 10, italics in original)

insights that “knowing what to develop and design…is absolutely essential for commercial success,”suggest that the

vital, yet often elusive, knowledge of user needs can be effectively harnessed by incumbents through access to in-

house users.

2

Despite the recent interest in exploring the role of in-house users, scholars have somewhat over-

looked the role of such users during a disruptive technological change (Christensen, 1997)—a change that has

received significant attention from both academic scholars (e.g., Ansari, Garud, & Kumaraswamy, 2016) and the pop-

ular press (e.g., Lepore, 2014).

Motivated by these recent investigations into the role of CTs and in-house users and in an effort to better

understand how firm-level capabilities affect the strategic renewal of large incumbents during a disruptive techno-

logical change, we formulate a normative theory of the firm to explain innovation outcomes during such a change.

1

Following Cattani (2006, p. 286) we define relevant CTs as knowledge of CTs that is “accumulated without anticipation of subse-

quent uses (foresight), but (that) might later prove to be functionally ‘pre-adapted0(i.e., valuable) for alternative, as yet unknown,

applications.”

2

Following Roy and Sarkar (2016), we define in-house user as a division within the focal firm that is a user of products manufac-

tured by other divisions within the same firm.

262 ROY ET AL.