Process management and technological innovation: a longitudinal study of the photography and paint industries

Administrative Science Quarterly,  Dec, 2002  by Mary J. Benner,  Michael Tushman

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Because they focus on adherence to routines, process management activities have the potential to affect an organization's technological innovations. Technological innovation is an important source of variation in organizations and, in turn, a root of organizational adaptation (Nelson and Winter, 1982; Tushman and Nelson, 1990). Technological innovation provides organizations with options for either initiating or responding to technological change. Dynamic capabilities are anchored in both exploiting current technologies and resources for efficiency benefits and in generating new possibilities through exploration (March, 1991; Teece, Pisano, and Shuen, 1997; Rosenkopf and Nerkar, 2001). Research in technological innovation has noted organizational tendencies toward local search and exploitation (e.g., Helfat, 1994; Sorensen and Stuart, 2000) and the role of stable routines in incumbents' inability to respond appropriately to technological change (e.g., Henderson and Clark, 1990; Christensen and Bower, 1996). More generally, work in learning and evolution has suggested that increased routinization and coordination in an organization's activities may speed responsiveness in stable environments but also contributes to resistance to change, competency traps, and inadequate or inappropriate responses in changing environments (e.g., Levitt and March, 1988; Leonard-Barton, 1992; Cohen and Bacdayan, 1994; Sull, Tedlow, and Rosenbloom, 1997; Levinthal, 1997b). Abernathy (1978) argued that as firms in the auto industry became focused on incremental change and improvement, they were increasingly unable to undertake more radical, variation-creating forms of innovation.

Exploitation and Exploration in Technological Innovation

Exploration and exploitation have been characterized as fundamentally different search modes (March, 1991). While exploitation involves local search that builds on a firm's existing technological capabilities, exploration involves more distant search for new capabilities (March and Simon, 1958; Weick, 1979). Exploitative innovations involve improvements in existing components and architectures and build on the existing technological trajectory, whereas exploratory innovation involves a shift to a different technological trajectory (Christensen, 1997; Rosenkopf and Nerkar, 2001). Empirical literature reflects this dichotomy, often distinguishing between innovations that leverage a firm's existing knowledge and innovations that rely on no previous firm knowledge (e.g., Sorensen and Stuart, 2000; Rosenkopf and Nerkar, 2001). For example, innovation researchers often distinguish between patents that cite one or more prior patents of the focal firm and patents that cite no prior patents of a focal organization. Implicit in such approaches is an assumption that truly exploratory, variance-increasing activities require distant search and a departure from a focal firm's store of current skills and capabilities. The idea of exploration as distant search can be extended by characterizing an organization's innovative activity along a continuum, measured by the extent to which it is anchored in knowledge used in a firm's previous innovations. Innovation is increasingly exploratory the more it departs from knowledge used in prior innovation efforts and, conversely, increasingly exploitative the more deeply anchored it is in existing firm knowledge.