Stock of downstream complementary assets as a catalyst for product innovation during technological change in theU.S.machine tool industry

Abstract

Research summary: We investigate the effect of incumbents' stock of downstream complementary assets on their product innovation during a disruptive technological change. We theorize that a firm's stock of downstream complementary assets, by providing critical information about shifting demand conditions, will play a catalytic role in firm adaptation during such a change. Using the advent of disruptive computer numerical control machine tools in the U.S. machine tool industry during the 1970s and 1980s as the context, we find that firms with greater stocks of downstream complementary assets are likely to be product innovation leaders during such a change. Managerial summary: Disruptive changes are challenging firms across industries. We concentrate on the U.S. machine tool industry during the 1970s and 1980s when Japanese manufacturers with disruptive computer numerical control systems challenged the U.S. manufacturers. We find that, under the threat of disruption, the greater the stock of downstream complementary assets a U.S. machine tool manufacturer has, the more likely it is to be the product innovation leader with the disruptive technology. Our findings provide novel insights for managers in companies that face disruptive changes and can help them avoid the consequences of such changes as predicted by prior research. Copyright © 2016 John Wiley & Sons, Ltd.

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“…Wu et al () similarly noted that complementary assets buffer firms during technological transitions. Building on prior research, Roy and Cohen () recently uncovered the proactive, catalytic role of downstream complementary assets in product innovation during a disruptive change.…”

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“…The technology strategy literature proposes to leverage complementary assets as another solution (Roy & Cohen, 2017;Tripsas, 1997;Wu et al, 2014). Compared to new entrants, incumbents are likely to have an array of complementary assets that facilitate them to realize or amplify their innovative efforts (Wu et al, 2014).…”

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