Entrepreneurial tweaking

Abstract

PurposeExisting theories of innovation posit a split between incremental innovations produced by large incumbents and radical innovations produced by entrepreneurial start‐ups. The purpose of this paper is to present empirical evidence challenging this foundational assumption by demonstrating that entrepreneurs play a leading role, not a subordinate role, in sourcing incremental innovations through secondary inventions and design modifications.Design/methodology/approachApplying the methods of historical econometrics, this study draws parallels between two dramatically different contexts: the mechanized reaper (1803‐1884) and cloud computing services (1961‐2011). Data for the reaper were drawn from 517 historical sources involving 348 modifications. Data for cloud computing services were drawn from 3,882 US patent filings and firm‐level data drawn from the Dun & Bradstreet database.FindingsEntrepreneurial tweaking plays a central role in commercializing dominant designs. Among the highest‐ranked incremental innovations leading to the commercialization of the reaper and cloud computing, nearly 90 percent were attributable to entrepreneurs. And yet, an entrepreneur had only a one in fourteen chance of garnering returns from a reaper innovation and a one in nine chance of gains from a cloud computing improvement.Practical implicationsIncremental innovations by entrepreneurs are indispensable to the widespread commercial acceptance of new technologies. Yet, entrepreneurial tweakers rarely benefit from the significant value they have created.Originality/valueThis paper constitutes the first significant attempt to empirically address the central role of entrepreneurs in producing incremental innovations that result in the commercialization of radical breakthroughs.