Exploratory innovation and exploitative innovation in the phase of technological discontinuity: the perspective on patent data for two IC foundries

Abstract

This study investigates how firms manage different innovation modes in the context of technological discontinuities. Using the aluminium-to-copper transition process, we collected patent data from the time period 1997 to 2001 for the top two firms in the IC foundry industry, the Taiwan Semiconductor Manufacturing Company and the United Microelectronic Corporation. We suggest that environmental responsiveness to technological uncertainty can provide a background for understanding how incumbent firms respond to managerial challenges associated with the exploratory–exploitative innovation tension. The statistical results indicate that incumbent firms simultaneously conduct exploratory and exploitative innovation and, furthermore, engage in significantly more exploratory innovation than exploitative innovation when faced with technological discontinuities.