Adapting to Uncertainty in Complements: Product Innovation and Evolution of Complementary Technolo

Abstract

Although prior research highlights the strategic importance of complementary technologies, less attention has been paid to implications of changes in complementary technologies. This paper studies how product innovation in firms is affected by uncertainty during the evolution of complementary technologies. We argue that technological uncertainty about the future of complementary technologies creates an inducement for firms to alter features in focal products. We hypothesize that firms launch products with a greater number of features when uncertainty about the future of complementary technologies is higher. We then hypothesize that the effects of uncertainty reduce for firms with a higher breadth of technical knowledge about the focal product and for firms with greater commercial knowledge about the focal product. These hypotheses are supported in a sample of mobile device manufacturers during 2006-2015, a period that witnessed rapid and uncertain changes in complementary mobile technologies. Additional analysis reveals that firms mainly increased recombination of existing features, suggesting a shift away from novelty during higher uncertainty in complementary technologies. The paper advances our understanding of how complementary technologies shape innovation, showing that change in complementary assets is likely to be an important area of investigation for strategy research.