Differences in approach to and output of innovation

Abstract

This paper examines whether and how established or incumbent firms and new entrants differ in their approach to innovation and innovation output. Analyzing three streams of theory we argue that established firms base their approach to innovation strategy on their resources, capabilities, technologies, and existing markets, while new entrants approach innovation from emerging customer needs and new markets. We also view that established companies are more likely to produce innovation related to new technology, products, and processes, while new entrants are more likely to perform marketing or business model innovations. In-depth qualitative interviews with CEOs and CEO- level officials in a sample of small software businesses in India produce results that support the conclusions from theory. These results have implications for industry and policy makers and open up avenues for further research.