How Do Established Firms Produce Breakthrough Innovations? Managerial Identity‐Dissemination Discourse and the Creation of Novel Product‐Market Solutions

Abstract

Despite the legacy of experience, some established firms are able to avoid a mindset, behaviors, and routines that can be expected to lead them down paths of local search and incremental product innovations of ever‐declining value. Indeed, established firms are often adept at introducing successful path‐breaking innovations. To explain this apparent paradox, this article draws on the organizational identity literature to present a model that ascribes breakthrough innovations by established firms to managerial identity‐dissemination discourse (MIDD). MIDD is argued to provide a sense‐giving framework, which fosters an understanding of the firm as a nexus of values around which the firm can be continuously rediscovered and reconstituted in new ways. By exposing the firm as an idea that can assume fresh forms in terms of product‐market combinations, MIDD stimulates and coordinates creative endeavor, thus increasing the disposition to produce breakthrough innovations. The model also suggests that the impact of MIDD is likely to depend on transformational leadership and the level of centralization and formalization in the company. The results of a cross‐sectional empirical study provide support for the model. In contrast to the focus of earlier research on behavioral and structural explanations for breakthroughs by established firms, this article advances understanding by offering a cognitive explanation. In doing so, the article highlights that creativity and innovation in firms are mentally located in an interpretive schema of the firm's identity, which has important implications in relation to organizing for breakthroughs. The article discusses these implications with particular reference to the use of multifunctional teams and advanced information and communication technologies for facilitating breakthroughs.

Organizing for Radical Innovation: Exploring Novel Insights

“…The papers by Kamuriwo et al () and Perra et al (), which are respectively the fifth and the sixth papers of the special issue, complement each other well. Indeed, these works challenge the established view that newly created firms have a flexibility advantage over large incumbent firms in developing breakthrough innovations and introducing them to the market because the latter firms suffer from path dependency and organizational inertia.…”

“…Theoretical perspectives range from diversity theories (Mohammadi, Brostrom, and Franzoni, ) to human resource management (Aagaard, ), institutional theories (Radaelli, Currie, Frattini, and Lettieri, ), open innovation (Kamuriwo, Baden‐Fuller, and Zhang, ), organizational identity and managerial identity‐dissemination discourse (Perra, Sidhu, and Volberda, ), resource management (Li, Li, Wang, and Ma, ), and social network theories (Dong, McCarthy, and Schoenmakers, ). The proposed methodologies encompass both case studies (Aagaard, ; Radaelli et al, ) and quantitative analyzes, with the latter including panel data (Kamuriwo et al, ), network analyses (Dong et al, ), and cross‐sectional specifications (Li et al, ; Mohammadi et al, ; Perra et al, ). Six out of seven papers focus on a single national context, namely China (Li et al, ), Italy (Radaelli et al, ), the Netherlands (Perra et al, ), Sweden (Mohammadi et al, ), the United Kingdom (Kamuriwo et al, ), and the United States (Dong et al, ).…”

“…The proposed methodologies encompass both case studies (Aagaard, ; Radaelli et al, ) and quantitative analyzes, with the latter including panel data (Kamuriwo et al, ), network analyses (Dong et al, ), and cross‐sectional specifications (Li et al, ; Mohammadi et al, ; Perra et al, ). Six out of seven papers focus on a single national context, namely China (Li et al, ), Italy (Radaelli et al, ), the Netherlands (Perra et al, ), Sweden (Mohammadi et al, ), the United Kingdom (Kamuriwo et al, ), and the United States (Dong et al, ). Aagaard () presents a case study of a Danish firm and seven validation studies of firms from four countries—Denmark, Belgium, Switzerland and the United States.…”

“…Perra and colleagues () examine the conditions under which established firms manage to introduce breakthrough innovations, an event that scholars deem to be rare but not impossible. For this purpose, the authors use an identity lens.…”

“…Overall, we learn that the key challenge in organizing for radical innovation consists of designing organizational arrangements that favor the creation and original recombination of new knowledge. To this end, firms can leverage workforce diversity (Mohammadi et al, ), human resource practices (Aagaard, ) and professional practices (Radaelli et al, ), resource management processes (Li et al, ), open innovation strategies (Kamuriwo et al, ), organizational identity (Perra et al, ), and alliance networks (Dong et al, ).…”