FREQUENT INNOVATION AND MORTALITY IN HIGH-TECHNOLOGY COMPETITION.

Abstract

Scholars are paying increasing attention to the risks associated with organizational change. However, one important type of change--technological innovation--has appeared to be immune, at least implicitly, from such risks, and little attention has been given to the possibility that frequent innovation can be as hazardous as other kinds of organizational change. This paper argues that there may be tradeoffs to high rates of technological change. The costs are of two kinds: overestimating the advantages and receptiveness of the innovation, and the organizational disruptions associated with frequent innovation. Using data on the population of worldwide floppy disk drive manufacturers, we analyze (1) the effect of the frequency of innovation on organizational mortality; (2) the extent to which the relationship between innovation and survival may interact with important organizational characteristics such as size, age and entry status; and (3) whether innovators that are large, old, or de alio generate strong competition. We find that the average firm is likely to fail the more frequently it innovates, but also that large and, to a lesser extent, de alio innovators are less likely to fail. We also find that large innovators generate more powerful competition. Advice to managers to engage in continuous innovation can therefore be misguided because unless firms are large, they may incur costs that are so great that the firm actually