Complementary Assets as Pipes and Prisms: Innovation Incentives and Trajectory Choices

Abstract:     
A long-standing interest in the technology strategy domain has been the question of the failure of incumbent firms in the face of radical technical change. We add to these prior contributions by highlighting the role a firm’s existing set of complementary assets have in influencing its investment in alternative technological trajectories. We develop an analytical model that considers firm heterogeneity with respect to both technological trajectories and complementary assets. Complementary assets play a dual role in incumbents’ investment behavior toward radical technological change: they are not only resources that can buffer firms from technology change, but also prisms through which firms view those changes, influencing both the magnitude of resources that should be invested and the trajectory to which these resources should be directed.

Number of Pages in PDF File: 51

Keywords: Complementary assets, technology strategy, innovation incentives, complement-preserving trajectory, complement-disrupting trajectory

JEL Classification: L13, O31, O32, O33

Accepted Paper Series