Why Do Incumbents Respond Heterogeneously to Disruptive Innovations? The Interplay of Domain Identity and Role Identity

• DOI: http://doi.org/10.1111/joms.12345
• Date: 01 November 2018
• Published date: 01 November 2018

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

Why Do Incumbents Respond Heterogeneously to

Disruptive Innovations? The Interplay of Domain Identity

and Role Identity

Nadine Kammerlander, Andreas König and Melanie Richards

WHU - Otto Beishe im School of Management; University of Passau; University of Bristol

ABST RACT We adopt a multifaceted view of organi zational identity to contribute to

research on organiz ational identity and incumbent adaptations to disrupt ive innova-

tions. Based on a qua litative, multi- case study on the responses of German publishi ng

houses to the emergence of digitali zation, we distill a novel and thus far disregarded

facet of organizat ional identity: organi zational role identity. We show how organiza-

tional role identity and organ izational domain identit y – the facet that has so fa r

dominated research on identity and in novation – interactively determine how orga niza-

tions interpret and respond to a disr uptive innovation. In contrast to prev ious studies,

we show that incumbents experience dysfu nctional identity- driven struggles when one

of the two identity facets is ch allenged by the disrupti ve innovation while the other is

enhanced. We also induce that domain and role identities ca n jointly determine how

quickly incumbents react to a d isruption, whether they adopt that disr uption, and the

innovativeness of their respons es.

Keywo rds: disr uptive innovation, incumbent inerti a, organizat ional adaptation,

organi zational ident ity

INTRODUCTION

One of the most critical challenges for established companies is making sense

of and responding to disruptive innovations – i.e., new ways of creating and cap-

turing value that dramatically dev iate from the traditional innovation trajectory

and are inherently financially u nappealing to incumbents (Ansari et al., 2016;

Christensen and Bower, 1996; Klenner et al., 2013; Yu and Hang, 2010). In fact,

many previous market leaders have lost their competitive dominance when dis-

ruptive innovations, such as digital photography (Benner, 2010), online news

Journal of Manageme nt Studies 55:7 November 2018

doi: 10.1111/j oms .123 45

Address for reprints: Nadine Kam merlander, WHU - Otto Beisheim S chool of Management,

Burgplatz 2 , 56179 Vallenda r, G ermany (nadine.kammerlander@whu.edu).

Why Do Incumbents Respond Heterogeneously to Disruptive Innovations? 1123

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

(Gilbert, 2005), and online music-distribution systems (Ansar i and Krop, 2012),

emerged. Given these ramificat ions, a wide stream of research has explored how

organizational decision makers make sense of and adapt to disruptive innova-

tions (for summaries, see Ansar i and Krop, 2012; Eggers and Park, 2018; Hill and

Rothaermel, 2003).

Within this research stream, a new conversation has emerged, which suggests

that studies of the dynamics between organizational identity and innovation

might be particularly suitable for developing a more accurate portrayal of the

challenges involved in adapting to disruptive innovation (Altman and Tripsas,

2015; Anthony and Tripsas, 2016; Garud and Karunakaran, 2017; Livengood and

Reger, 2010; Tripsas, 2009). According to Gioia et al. (2013, p. 125), ‘[o]rganiza-

tional identity represents those features of an organization that in the eyes of its

members are central to the organization’s character or ‘self-image,’ make the or-

ganization distinctive from other similar organizations, and are viewed as having

continuity over time.’ In other words, ‘organizational identity’ refers to members’

situated perceptions of who we are as an organization (Albert and Whetten, 1985).

Such perceptions establish a cognitive ‘lens that provides a basis for sense-making’

(Cornelissen et al., 2007, p. 9; Dutton and Dukerich, 1991; Gioia and Thomas,

1996) and are, therefore, likely to influence how firm members attend to, inter-

pret, and respond to changes (Livengood and Reger, 2010). Perceptions of or-

ganizational identity are particularly salient and influential when external events

require organizations to make fundamental changes (Ashford et al., 1989; Dutton

and Dukerich, 1991; Nag et al., 2007), which is the case with disruptive innova-

tions (Danneels, 2007).

The recent studies on organizational identity and innovation promise a new

perspective on one of the focal questions in the conversation on disruptive inno-

vation: Why do relatively homogeneous incumbents within an industry respond

heterogeneously to the same disruption (Livengood and Reger, 2010; Tripsas,

2013)? Most importantly, response heterogeneity might be explained by the fact

that the decision makers in some firms perceive a given disruptive innovation

as enhancing their organization’s identity, while decision makers in other firms

perceive the same innovation as threatening or challenging their organization’s

identity (Anthony and Tripsas, 2016). Additionally, firms might differ in how

their members align identity perceptions and innovative activities (Anthony and

Tripsas, 2016; Garud and Karunakaran, 2017).

Despite these important advances, critical conceptual and empirical gaps re-

main in our understanding of the role of organizational identity in incumbents’

responses to disruptive innovations. Most importantly, as noted by Anthony and

Tripsas (2016), the extant literature almost exclusively adopts a sociological or

institutional view of organizational identity (Navis and Glynn, 2010; Watkiss

and Glynn, 2016). This perspective envisions organizational identity as enacted

through claims of membership in a specific category, or domain, of organizations,

especially claims about ‘which group of organizations we belong to’ and ‘what is

our competitive home turf’ (Porac et al., 1989). However, this view disregards that

1124 N. Kammerlander et al.

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

organizational identity is a multifaceted construct, which is construed through

many other attributes than merely membership in a certain domain (Gustafson,

1995). For instance, perceptions of organizational identity also include claims

about ‘why and how we do what we do’ and ‘how we relate to others’ (Gustafson

and Reger, 1995).

Acknowledging the multifaceted character of organizational identity is of vital

importance. Prior accounts (e.g., Gilbert, 2005) indicate, at least implicitly, that

disruptive innovations might challenge facets of organizational identity beyond

identity claims related to firms’ membership in certain competitive groups or in-

dustries. Yet, we lack a clear understanding of which other facets are challenged

by disruptions and how. Moreover, the extant research does not address how these

different identity challenges could affect incumbent responses to disruptive inno-

vation (Ashforth and Mael, 1996; Van de Ven and Poole, 1995). In short, identity

challenges and innovation-identity realignment processes might be substantially

more complex and multilayered than described thus far, which motivated us to

investigate two crucial research questions: First, which facets of organizational iden-

tity other than perceptions of the organization’s membership categories surface when members

attend to and interpret a disruptive innovation? Second, how and why does the way in

which members perceive the various facets of their identities as challenged or enhanced by

a disruptive innovation trigger inter-firm differences in organizational adaptation to that

innovation?

Given the open character of our research questions and the fact that we searched

for heterogeneity in organizational response behaviors, we adopted a theory-in-

formed, inductive, longitudinal, multiple-case research strategy (Eisenhardt,

1989; Glaser and Strauss, 1967; Yin, 1994). More specifically, we conducted a lon-

gitudinal analysis of 14 incumbent German book-publishing companies and their

responses to digitalization between the early 1990s and 2011. We find that mem-

bers of incumbent organizations make sense of disruptive innovations through

their construals of two facets of organizational identity, which we label organiza-

tional domain identity and organizational role identity. Organizational domain iden-

tity – a concept closely related to the domain-focused research on identity and

innovation mentioned above (e.g., Livengood and Reger, 2010) – refers to organi-

zational identity claims that stem from members’ perceptions of the category of organizations

to which their organization essentially belongs. For instance, the members of some of

the publishing companies we observed predominantly envisioned their organiza-

tions as ‘manufacturers of printed books,’ while the members of other publishers

perceived their firm as belonging to the category of ‘content providers.’ In con-

trast, organizational role identity – a facet of organizational identity that has not

yet been conceptualized in prior studies – refers to those organizational identity

claims that stem from members’ perceptions of their organization’s longstanding, central,

and distinct impact on the overall development of its respective category and their organiza-

tion’s essential relation to other actors in that category. For instance, some publishers’

members described their organization’s role in its category as that of a shaper who

leads other players and defines the development of the category, while members