Intraorganizational Alignment and Innovation Processes: Philips and Transistor Technology

The Dutch company Philips succeeded in producing transistors early on. By the early 1950s, it had acquired a strong position in the European semiconductor market. However, by the end of the 1950s, it was being surpassed by competitors. In response to the developments in solid state electronics, Philips' management adjusted the company's research, development, and production capabilities, enabling the firm to bring point-contact and layer transistors onto the market and to develop its own high-frequency transistor. When demand for industrial transistors increased, Philips was unprepared, leaving it without an entrée to this new market. The company's exclusive contracts with IBM not only failed to produce the expected results; they also limited its ability to establish ties with other computer companies and most important it illustrated Philips' choice not to produce computers. Therefore, Philips did not build knowledge and expertise in the computer field. Philips' organizational structure hampered both its innovative capacity in the field of applications and its ability to adjust transistor requirements to suit customer needs. Thus, by the early 1960s, Philips found itself in a weakened position in the increasingly competitive transistor market.