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

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  • Frank T. Rothaermel

    () (College of Management, Georgia Institute of Technology, Atlanta, Georgia 30308-0520)

  • Charles W. L. Hill

    () (Department of Management and Organization, Business School, University of Washington, Seattle, Washington 98195-3200)

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.

Suggested Citation

  • Frank T. Rothaermel & Charles W. L. Hill, 2005. "Technological Discontinuities and Complementary Assets: A Longitudinal Study of Industry and Firm Performance," Organization Science, INFORMS, vol. 16(1), pages 52-70, February.
  • Handle: RePEc:inm:ororsc:v:16:y:2005:i:1:p:52-70
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    File URL: http://dx.doi.org/10.1287/orsc.1040.0100
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    References listed on IDEAS

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    1. Graciela Kaminsky & Sergio L. Schmukler, 2002. "Emerging Market Instability: Do Sovereign Ratings Affect Country Risk and Stock Returns?," World Bank Economic Review, World Bank Group, vol. 16(2), pages 171-195, August.
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    4. Morris Goldstein & Carmen M. Reinhart, 2000. "Assessing Financial Vulnerability: An Early Warning System for Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 100.
    5. Carmen M. Reinhart, 2002. "Default, Currency Crises, and Sovereign Credit Ratings," World Bank Economic Review, World Bank Group, vol. 16(2), pages 151-170, August.
    6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    7. repec:wsi:wschap:9789814749589_0011 is not listed on IDEAS
    8. Carmen M. Reinhart, 2002. "An Introduction," World Bank Economic Review, World Bank Group, vol. 16(2), pages 149-150, August.
    9. James, Christopher, 1992. " Relationship-Specific Assets and the Pricing of Underwriter Services," Journal of Finance, American Finance Association, vol. 47(5), pages 1865-1885, December.
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    Cited by:

    1. repec:spr:manint:v:50:y:2010:i:3:d:10.1007_s11575-010-0039-y is not listed on IDEAS
    2. repec:kap:sbusec:v:49:y:2017:i:3:d:10.1007_s11187-017-9900-8 is not listed on IDEAS
    3. Jun Na & Yao Sun, 2016. "How do Multinationals Exploit Technologies in the Global Market?," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 1-29, June.
    4. Hwan Jin Kim, 2016. "The Comparative Effects of Transaction Cost Economics and Resource Based View: A Technological Alliance Motivational Perspective," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 6(5), pages 64-75, May.
    5. Hu, Mei-Chih & Mathews, John A., 2008. "China's national innovative capacity," Research Policy, Elsevier, vol. 37(9), pages 1465-1479, October.
    6. repec:kap:jtecht:v:42:y:2017:i:6:d:10.1007_s10961-016-9511-6 is not listed on IDEAS

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