Architectural Innovation
Acs and Audretsch, (1988)), but this research has either not distinguished between minor and major innovations or has used aggregated data and a limited set of variables to explore the impact of firm specific effects on productivity.
This failure to integrate theories of firm capability into empirical studies of the impact of technological innovation may result from the fact that these types of explanations yield qualitatively similar predications to the class of explanations that focuses on investment behavior.
Both suggest that established firms will be more likely than entrants to introduce incremental innovations, since established firms will not only invest more in incremental innovation in an attempt to extend monopoly power but will also have more effective research and development efforts since they have the benefit of historical experience with the technology. Similarly the two classes of explanation suggest that established firms will be less successful in the face of radical innovation both because in some circumstances they will invest less for fear of cannibalizing their existing revenues, and because their research and development efforts will be less effective than those of entrants.However recent work by Henderson and Clark (1990) suggests that it is increasingly important to explicitly distinguish between the two effects and to understand the interactions between them. They suggest that a significant number of innovations are "architectural."
Architectural innovations are incremental in the economic sense in that they do not provide dramatically different or improved benefits to their customers, and they continue to actively compete with existing products, but they are radical in the organizational sense in that established firms find them extremely difficult to develop. Architectural innovations are likely to be the focus of complex competitive dynamics since the strategic incentives to invest in them that flow from
market
This failure to integrate theories of firm capability into empirical studies of the impact of technological innovation may result from the fact that these types of explanations yield qualitatively similar predications to the class of explanations that focuses on investment behavior.
Both suggest that established firms will be more likely than entrants to introduce incremental innovations, since established firms will not only invest more in incremental innovation in an attempt to extend monopoly power but will also have more effective research and development efforts since they have the benefit of historical experience with the technology. Similarly the two classes of explanation suggest that established firms will be less successful in the face of radical innovation both because in some circumstances they will invest less for fear of cannibalizing their existing revenues, and because their research and development efforts will be less effective than those of entrants.However recent work by Henderson and Clark (1990) suggests that it is increasingly important to explicitly distinguish between the two effects and to understand the interactions between them. They suggest that a significant number of innovations are "architectural."
Architectural innovations are incremental in the economic sense in that they do not provide dramatically different or improved benefits to their customers, and they continue to actively compete with existing products, but they are radical in the organizational sense in that established firms find them extremely difficult to develop. Architectural innovations are likely to be the focus of complex competitive dynamics since the strategic incentives to invest in them that flow from
market