Firm Size and Product Innovation

Abstract

The linkage between firm size and product innovation has frequently been discussed by both researchers and other writers. John Ettlie and Albert Rubenstein report the results of a study which, by distinguishing between the incorporation of radical and incremental technology, attempts to resolve some of the controversy surrounding this issue. In particular, the authors hypothesize that up to a certain point, large firms with greater resources are more likely to commercialize radically new products successfully. Findings generally support this theory but refinements to the model are now possible. For example, firms with 1000 employees or less need not be excluded from radical product introduction if they resolve critical funding and research problems. This size‐radicalness distribution is shaped like a fish hook or a claw. That is, up to about 1000 employees, there is no significant relationship between number of employees and radicalness of a new product. Between 1200 and 11,000 employees there is a significant, direct relationship. Finally, very large organizations (in excess of about 45,000 employees) are unlikely to introduce radically new products. Larger firms were significantly more likely to adopt ambitious new processing technologies in order to introduce these new products. Also, new product success was significantly predicted by the absence of funding problems in introducing the innovation and the degree to which the new product was a radical departure from existing practice.

Are Small-Sized Firms Really Innovative? Understanding the Indian Scenario

“…The Schumpeterian argument mentioned above finds support in other works as well 10,11 . Meta-analysis on a collection of the literature regarding firm size and innovation was done and the results indicated a positive relationship between firm size and innovation 12 .…”

Does incremental and radical innovation performance depend on different types of knowledge accumulation capabilities and organizational size?

“…For their part, Ettlie et al (1984) show a non-significant effect of size on radical technological innovation performance (comprising product and process innovations) and a positive effect on incremental technological innovation performance. Ettlie and Rubenstein (1987) report the relationship between radical innovation performance and size is bell-shaped (). Conversely, Pavitt (1990) and Tsai and Wang (2005) find a U-shaped curve, suggesting that medium-size firms have the liabilities of large and small firms and few of their strengths.…”

Capturing value from alliance portfolio diversity: The mediating role of R&D human capital in high and low tech industries

“…Firm size has been related to innovation capabilities and the novelty of innovations (Ettlie and Rubenstein, 1993, Chandy and Tellis, 2000. To account for the non-normality of the size measure, a logarithm transformation was used (Damanpour, 1992).…”