Technological Discontinuities and Complementary Assets: A Longitudinal Study of Industry and Firm Performance

  • Authors:

  • Frank T. Rothaermel;Charles W. L. Hill

  • Affiliations:

  • College of Management, Georgia Institute of Technology, Atlanta, Georgia 30308-0520;Department of Management and Organization, Business School, University of Washington, Seattle, Washington 98195-3200

  • Venue:
  • Organization Science
  • Year:
  • 2005

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Abstract

We suggest that the type of complementary assets (generic versus specialized) needed to commercialize a new technology is critical in determining the industry- and firm-level performance implications of a competence-destroying technological discontinuity. At the industry level, we hypothesize that incumbent industry performance declines if the new technology can be commercialized through generic complementary assets, whereas incumbent industry performance improves if the new technology can be commercialized through specialized complementary assets. At the firm level, we posit that an incumbent firm's financial strength has a stronger positive impact on firm performance in the postdiscontinuity time period if the new technology can be commercialized through generic complementary assets. We hypothesize, however, that an incumbent firm's R&D capability has a stronger positive impact on firm performance in the postdiscontinuity time period if the new technology can be commercialized through specialized complementary assets. Drawing on multi-industry, time series, and panel data over a 26-year period to analyze pre- and postdiscontinuity industry and firm performance, we find broad support for our theoretical model.