Strategic Innovation Management and the Firm's Institutional Context

Abstract

Different forms of innovation management are associated with specific institutional contexts. Christensen et al (2001) argued that because firms in the United States have the capability to nurture disruptive technologies, they have been highly successful. Whitley (2002) argued that because of the nature of the Japanese economy, it does not experience disruption. In this paper, we ask: does the firm's institutional context affect how it manages innovation? In particular, we explore how firms operating within the two broad types of developed capitalist economies - liberal market economies (LMEs) and coordinated market economies (CMEs) (Hall and Soskice, 2001) - manage innovation. Is there one best way to successful innovation management? In other words, do firms based in the LMEs and the CMEs manage innovation - including the generation of knowledge - differently and is one type of economy more successful than the other, or are they simply good at different things? If disruptive innovation only occurs in LMEs as suggested by both Christensen and Whitley, are CMEs simply not innovative? If CMEs do not experience 'disruption,' what accounts for innovation there? We suggest the term 'discontinuous innovation' (c.f. Henderson and Clark, 1990; Tushman and Anderson, 1986; Utterback, 1994) effectively describes the type of innovation that occurs in CMEs. We argue that the institutional context of CMEs acts against 'disruption' but in favor of 'discontinuous innovation' as a highly effective and sustainable method of innovation management.

Keywords: innovation management, comparative capitalism, institutional context, disruption, discontinuous innovation

JEL Classification: P16, P19, P50, O31, O32, O33, L59, L20