The Subjective Productive Opportunity and Incumbent Response to Technological Change

Abstract

Before the 1973 oil crisis the station wagon was the dominant design in the family vehicle product market niche. Following the oil crisis and a series of environmental disruptions, the station wagon was no longer an optimal design and each of the major U.S. automobile manufacturers – Chrysler, Ford and General Motors – introduced minivans as an alternative to the station wagon. While Chrysler introduced a front-wheel drive minivan in 1984, Ford and General Motors initially introduced rear-wheel drive minivans. This choice provided an advantage to Chrysler in the family vehicle product market niche that lasted over fifteen years. This paper uses a multiple case study, focusing on the transition from station wagons to front-wheel drive minivans, to understand the response of established firms to technological change. Our case study suggests that managers' understanding of a firm's subjective opportunity structure is necessary in explaining firm response to technological change. We argue that extant theory on incumbent innovation underemphasizes managerial enactment of the environment.