The effects of internal and external competition on innovation breadth

Abstract

Prior research shows that increasing the breadth of elements used to create a firm's innovations can improve its ability to successfully introduce innovations. Yet, our understanding of the antecedents of innovation breadth is limited. This study investigates how competition affects product managers' decision to expand the breadth of elements used to create an innovation. I build on the awareness–motivation–capability (AMC) framework to propose that inter-firm competition from rivals' innovations and intra-firm competition from a firm's own innovations both create pressures for product managers to increase innovation breadth, but that the greater awareness and motivation resulting from internal competition will lead managers to increase innovation breadth more in response to intra-firm competition. I find support for these propositions based on a longitudinal examination of mutual fund innovations. This study offers contributions by developing theory about how competition shapes managers' decision to expand the diversity of elements used to develop an innovation.