Frontiers of Entrepreneurship Research
1997 Edition

SUMMARIES

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THE IMPACT OF ALLIANCES ON NEW BUSINESS FORMATION RELATED TO THE DEVELOPMENT OF DISCONTINUOUS INNOVATIONS IN ESTABLISHED FIRMS


SUMMARY

Name
Lois S. Peters WORKSHOP

Address
Lally School of Management and Technology
Rensselaer Polytechnic Institute
Troy, NY 12180

Telephone Fax
518-276-2977 518-276-8661

Principal Topics
During the 1980s technology-rich U.S. firms had difficulty competing in some industries, e.g. semiconductor memory chips, office and factory automation, and consumer electronics, because of their inability to convert technological advancements into competitive advantage in the marketplace. If firms fail to revitalize and sustain their competitive position through the development of new businesses and products, they risk eventual decline. Sustaining existing businesses through incremental and continuous improvements to current product lines requires traditional, administrative corporate management practices. Preliminary evidence from the pilot phase of this study suggests that the development of new businesses and product lines based on discontinuous, or radical, innovations¾which is critical for renewal of the firm's competitive position¾requires entrepreneurial management practices. This paper focuses on characterizing the entrepreneurial use of technological sources and resources for discontinuous innovation, particularly with respect to internal and external alliances, and the roles they play in corporate venturing. The framing questions for the study include the following: (1) What are the internal and external technological sources of discontinuous innovation? (2) What was the role of internal and external alliances in developing new corporate ventures on the basis of discontinuous innovation? (3) To what extent did small "high tech" firms participate in these alliances (4) What were the positive and negative impacts of the internal and external alliance partners?

Method
During the pilot phase of the project (1995-96) two site visits were made to each of six companies engaged in a total of eight discontinuous innovation projects. In depth interviews were conducted with members of each project team, including senior managers, project mangers and project team members, who provided both historic and current information and insights. In the first year of the full study (1996-97) we are expanding the sample to at least ten companies and twelve projects. In addition, a fifty page survey instrument was mailed during July 1996 to twenty-five member companies of the Industrial Research Institute, each of which has agreed to complete the survey for two discontinuous innovation projects underway within their companies. Initial site visits to new companies and follow up visits to companies in the pilot sample will be completed by the research team in late 1996 and early 1997.

Major Findings
In the idea generation phase of entrepreneurial project formation small high-tech companies and strategic alliances are not as important as corporate and business unit R&D. Alliances and small "high tech" companies were increasingly important in the business definition and early development phase. Small "high tech" companies became less important in the later development and commercialization phase, but strategic alliances continued to be important through later development. Strategic alliances became less important in the commercialization phase. In early development strategic alliances equaled the importance of corporate R&D. A comparison between our field results and survey results is given in analyzing the validity of an organizational model of discontinuous innovation presented at the 1996 Babson conference.

Implications
The value to practitioners of this study is evident in the proactive participation of the Industrial Research Institute (IRI). The IRI Research-on-Research Committee has adopted this project as its lead project and its members have indicated that corporate venturing in the domain of discontinuous innovation is a challenge for management reflecting the high degree of uncertainty on a variety of dimensions and a need for new perspectives on risk management. For academics this research study will provide additional insights into the application of entrepreneurship principles to corporate venturing involving discontinuous innovation. Because of the longitudinal nature of this study we will be able to provide a well-grounded evolutionary perspective on the life cycle of entrepreneurial projects.

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Last Updated 04/25/98