Underrated Innovators: Reactive Search of Incumbent Firms under Disruptive Innovation Shocks

Abstract

How do incumbent firms choose appropriate response strategies in the face of disruptive shocks from new entrants? Based on the problem-solving perspective, we conducted a multiple-case study of three incumbent firms in China’s home appliance industry successfully responding to new entrants. The results show that (1) under the disruptive shocks, incumbents mainly face the problems of incremental or radical innovation in the technological dimension and existing or new demand in the market dimension. (2) In the face of heterogeneous problems, incumbents’ reactive timing (fast vs. slow) and search behavior (heuristic search vs. trial-and-error search) are different. (3) Through various action combinations, they can choose reinforcing, challenging, or adapting strategies to deal with the shocks. Overall, a key contribution of this paper is to provide a new conceptual framework for incumbents to respond to disruptive shocks, outlining their reactive search actions and processes. This framework responds to previous studies’ underestimation of incumbents and deepens the understanding of corporate strategic renewal activities in the era of change.