Frequent incremental change, organizational size, and mortality in high-technology competition

Abstract

While radical technological change is often characterized as hazardous, particularly to incumbents, incremental technological change has appeared to be immune from such risks. Little attention has been given to the possibility that under some circumstances incremental technological change can be quite risky. This article argues that there may be tradeoffs to high rates of incremental technological change. The costs are of two kinds: the organizational disruptions associated with frequent technological change and overestimating the advantages and receptiveness of the technological improvement. We argue that larger firms are better equipped than smaller firms to cope with these costs and will reap greater benefits from incremental changes. Using data on the population of worldwide floppy disk drive manufacturers, we find that frequent incremental technical changes decrease organizational mortality for large firms but increase it for smaller firms. We also find that large firms that frequently introduce incremental technological improvements are more potent competitors. This study helps us understand how frequent incremental change affects mortality as organizations grow. Advice to managers to engage in continuous incremental innovation can therefore be misguided because unless firms are large, they may incur costs that are so great that the firm actually fails by innovating frequently. Copyright 2010 The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.