Week 1 Readings: INCUMBENT ADAPTATION TO TECHNOLOGICAL CHANGE: THE
PAST, PRESENT, AND FUTURE OF RESEARCH ON HETEROGENEOUS INCUMBENT
RESPONSE J. P. EGGERS
Thus, the core question has shifted from “Why do incumbents fail?” to an exploration of why
some incumbents adapt and survive, whereas others are inert and fail.
The model outlines barriers to adaptation and the processes through which firms adapt to
technological change. For successful adaptation, incumbent firms need (1) new technological
knowledge and (2) complementary assets to commercialize the technology. If these resources
are lacking, firms must acquire or access them externally. However, internal and external
barriers can hinder this access. Additionally, even when firms possess the necessary resources,
internal barriers may still impede adaptation. The model suggests that existing research
identifies factors that influence the permeability of these barriers and the processes
incumbents use to overcome them.
Secondly, the proposed model identifies four dimensions of technological change: its impact
on core knowledge, complementary assets, the external ecosystem (e.g., suppliers, buyers,
stakeholders), and the uncertainty during the era of ferment. This framework categorizes
technological changes to enable consistent cross-context comparisons, provided studies
thoroughly describe the changes they examine. The approach highlights the importance of
aligning the characteristics of a technological change with the factors influencing a firm's
ability to adapt.
When technological change reduces the value of a firm's existing resources, the firm must
replace obsolete resources or create new bundles of technological and complementary
resources. New technologies involve core knowledge distinct from the existing technology,
requiring firms to acquire the necessary knowledge to adapt. Beyond technology,
complementary assets like distribution channels are crucial for profitability, but these assets
may lose value or need replacement due to technological changes. Firms can access new
resources internally (redeploying existing assets or developing new ones) or externally
(through acquisitions or partnerships). Adaptation, therefore, involves acquiring and
organizing technological and complementary resources effectively.
So, the latter can pose substantial barriers especially when something needs to be acquired
from outside the firm. Think of this example where the organization has a product of T1 and
T2, however, due to an exogeneous technological change, the product needs to switch to T3,
,which is in the organization but also to T5 which is outside the organization.
\
External barriers: Obstruct acquiring new knowledge and resources from outside the firm.
Acquisition e.g. of new resources
Internal barriers to assimilation: Prevent successful integration of new knowledge and
resources within the organization. firms may have access to necessary resources but be unable
to successfully integrate the new resources into the organization because internal barriers
make it difficult to use those resources This is triggered by the idea of; it is not invented
here. >> ability to recognize the value of new information, assimilate it, and apply it”
ASSIMILIATION OF new resources
Internal barriers to reconfiguration: Hinder the reorganization and adaptation of existing
resources, even when necessary knowledge and resources are available. Lacking the incentive
to rework operations to adopt a new generation of processes/products/operations because
existing customers/workers did not value the new technology.
Thus, before considering processes around acquisition and assimilation of new knowledge
(reconfiguration would still be required), it is worth considering the firm’s possession of
relevant knowledge initially Often a firms possesses more than it uses. So called Exaptation
is a “discontinuous evolutionary process expressed by functional change of a biological trait
which may open a new evolutionary trajectory” Exaptation: The article introduces the
concept of exaptation, where an existing resource is repurposed for a new function, as a
potential adaptation strategy for incumbents.
As showcased above, for a firm to overcome barriers, it goes through a process to adapt:
To overcome these barriers, firms must go through four stages:
1. Possession: Having the necessary knowledge and resources in-house.
2. Acquisition: Obtaining external knowledge and resources if they are not already
present.
3. Assimilation: Successfully integrating new knowledge and resources into the
organization.
4. Reconfiguration: Adapting resources and processes to exploit new opportunities.
,There are different antecedent that have an affect on these adaptations; likewise these are Firm
size, firm experience (Overall, firm experience builds capabilities, expands technological
knowledge, and influences strategic decisions, thereby impacting performance in
technological competition.), Complementary assets (can help and support but can also hinder
reconfiguration) , stakeholders, ecosystem, topmanagement, cognition and identity,
organizational structure.
Importance of Fit: The success of adaptation depends on the "fit" between the nature of the
technological change and the firm’s existing capabilities, knowledge, position, and cognition.
The article emphasizes that there is no universal set of factors that guarantees success for all
firms in all situations.
The definition of dynamic capabilities is the firm’s ability to respond to changing
environment and create or reconfigure its internal and external competencie
Core capacities:
1. Sensing opportunities and threats.
2. Seizing opportunities.
3. Enhancing, combining, protecting, and reconfiguring assets.
Managerial Role:
Recent literature emphasizes managerial cognition as the microfoundation of dynamic
capabilities.
Effective managerial cognitive capabilities influence all dynamic capabilities: sensing,
seizing, and reconfiguring asset
Conclusion:
The article advocates for a more nuanced approach to studying incumbent adaptation to
technological changes. It emphasizes that the nature of the technological change and the
interaction between various firm-specific factors are crucial aspects to consider. The
framework offered analyzes this complexity and encourages future research to delve into the
finer details of adaptation, rather than striving for a simplistic, general theory. The typology
can help compare and analyze technological changes and how specific factors have greater
impacts in certain contexts. The conclusion emphasizes the importance of synthesizing
existing literature on technological change and incumbent adaptation. It stresses the need for a
clear typology to categorize technological innovations based on their characteristics, helping
to analyze the antecedents to adaptation more effectively
This article aligns with our earlier discussion on Linco, which highlighted how strong
organizational identity can act as a barrier to adapting to new technologies—one of the
internal barriers to reconfiguration described in the article.
, The "barrier model" of adaptation, as described in the article, is a framework that identifies
the challenges incumbent firms face when adapting to technological change. The model posits
that adaptation does not occur instantly and that frictions arise, preventing some firms from
seamlessly transitioning to a new technological regime. These frictions are termed barriers
because they obstruct the flow of technological and complementary resources both from
external sources into the firm and within the firm's boundaries. The model assumes that a firm
does not possess all the necessary resources to adapt successfully.
The "barrier model" identifies three types of barriers:
1. External Barriers:
These barriers hinder the acquisition of new knowledge and resources from outside the
firm. This can occur due to:
o Stakeholder constraints: For example, analysts discouraging investment in
new technologies that lie outside a firm's core competencies.
o Resource scarcity in the external environment: Resources may be controlled
by competitors.
2. Internal Barriers to Assimilation:
These barriers prevent the successful integration of new resources into the
organization, even if the firm has access to them. Examples include:
o "Not Invented Here" (NIH) syndrome: A rejection of external knowledge
acquisition.
o Lack of absorptive capacity: The inability to recognize, assimilate, and apply
the value of new information.
3. Internal Barriers to Reconfiguration:
These barriers impede the reorganization and integration of resources to capitalize on
new opportunities, even when the firm possesses both knowledge and resources. This
can happen due to:
o Lack of incentives to adapt operations: For instance, when existing
customers do not value the new technology.
o Internal resistance to new business models: Resistance to reorganizing the
firm's operations.
o Political processes within the firm: These processes may fail to produce the
correct cognitive frameworks.
The three barriers assume that firms do not initially possess the necessary core or
complementary resources for successful adaptation. In reality, firms may possess relevant
resources ex ante through exaptation, where existing resources are repurposed for new
functions. The article highlights that the literature often overlooks the dynamic nature of
resources, including how their value can diminish over time.
PAST, PRESENT, AND FUTURE OF RESEARCH ON HETEROGENEOUS INCUMBENT
RESPONSE J. P. EGGERS
Thus, the core question has shifted from “Why do incumbents fail?” to an exploration of why
some incumbents adapt and survive, whereas others are inert and fail.
The model outlines barriers to adaptation and the processes through which firms adapt to
technological change. For successful adaptation, incumbent firms need (1) new technological
knowledge and (2) complementary assets to commercialize the technology. If these resources
are lacking, firms must acquire or access them externally. However, internal and external
barriers can hinder this access. Additionally, even when firms possess the necessary resources,
internal barriers may still impede adaptation. The model suggests that existing research
identifies factors that influence the permeability of these barriers and the processes
incumbents use to overcome them.
Secondly, the proposed model identifies four dimensions of technological change: its impact
on core knowledge, complementary assets, the external ecosystem (e.g., suppliers, buyers,
stakeholders), and the uncertainty during the era of ferment. This framework categorizes
technological changes to enable consistent cross-context comparisons, provided studies
thoroughly describe the changes they examine. The approach highlights the importance of
aligning the characteristics of a technological change with the factors influencing a firm's
ability to adapt.
When technological change reduces the value of a firm's existing resources, the firm must
replace obsolete resources or create new bundles of technological and complementary
resources. New technologies involve core knowledge distinct from the existing technology,
requiring firms to acquire the necessary knowledge to adapt. Beyond technology,
complementary assets like distribution channels are crucial for profitability, but these assets
may lose value or need replacement due to technological changes. Firms can access new
resources internally (redeploying existing assets or developing new ones) or externally
(through acquisitions or partnerships). Adaptation, therefore, involves acquiring and
organizing technological and complementary resources effectively.
So, the latter can pose substantial barriers especially when something needs to be acquired
from outside the firm. Think of this example where the organization has a product of T1 and
T2, however, due to an exogeneous technological change, the product needs to switch to T3,
,which is in the organization but also to T5 which is outside the organization.
\
External barriers: Obstruct acquiring new knowledge and resources from outside the firm.
Acquisition e.g. of new resources
Internal barriers to assimilation: Prevent successful integration of new knowledge and
resources within the organization. firms may have access to necessary resources but be unable
to successfully integrate the new resources into the organization because internal barriers
make it difficult to use those resources This is triggered by the idea of; it is not invented
here. >> ability to recognize the value of new information, assimilate it, and apply it”
ASSIMILIATION OF new resources
Internal barriers to reconfiguration: Hinder the reorganization and adaptation of existing
resources, even when necessary knowledge and resources are available. Lacking the incentive
to rework operations to adopt a new generation of processes/products/operations because
existing customers/workers did not value the new technology.
Thus, before considering processes around acquisition and assimilation of new knowledge
(reconfiguration would still be required), it is worth considering the firm’s possession of
relevant knowledge initially Often a firms possesses more than it uses. So called Exaptation
is a “discontinuous evolutionary process expressed by functional change of a biological trait
which may open a new evolutionary trajectory” Exaptation: The article introduces the
concept of exaptation, where an existing resource is repurposed for a new function, as a
potential adaptation strategy for incumbents.
As showcased above, for a firm to overcome barriers, it goes through a process to adapt:
To overcome these barriers, firms must go through four stages:
1. Possession: Having the necessary knowledge and resources in-house.
2. Acquisition: Obtaining external knowledge and resources if they are not already
present.
3. Assimilation: Successfully integrating new knowledge and resources into the
organization.
4. Reconfiguration: Adapting resources and processes to exploit new opportunities.
,There are different antecedent that have an affect on these adaptations; likewise these are Firm
size, firm experience (Overall, firm experience builds capabilities, expands technological
knowledge, and influences strategic decisions, thereby impacting performance in
technological competition.), Complementary assets (can help and support but can also hinder
reconfiguration) , stakeholders, ecosystem, topmanagement, cognition and identity,
organizational structure.
Importance of Fit: The success of adaptation depends on the "fit" between the nature of the
technological change and the firm’s existing capabilities, knowledge, position, and cognition.
The article emphasizes that there is no universal set of factors that guarantees success for all
firms in all situations.
The definition of dynamic capabilities is the firm’s ability to respond to changing
environment and create or reconfigure its internal and external competencie
Core capacities:
1. Sensing opportunities and threats.
2. Seizing opportunities.
3. Enhancing, combining, protecting, and reconfiguring assets.
Managerial Role:
Recent literature emphasizes managerial cognition as the microfoundation of dynamic
capabilities.
Effective managerial cognitive capabilities influence all dynamic capabilities: sensing,
seizing, and reconfiguring asset
Conclusion:
The article advocates for a more nuanced approach to studying incumbent adaptation to
technological changes. It emphasizes that the nature of the technological change and the
interaction between various firm-specific factors are crucial aspects to consider. The
framework offered analyzes this complexity and encourages future research to delve into the
finer details of adaptation, rather than striving for a simplistic, general theory. The typology
can help compare and analyze technological changes and how specific factors have greater
impacts in certain contexts. The conclusion emphasizes the importance of synthesizing
existing literature on technological change and incumbent adaptation. It stresses the need for a
clear typology to categorize technological innovations based on their characteristics, helping
to analyze the antecedents to adaptation more effectively
This article aligns with our earlier discussion on Linco, which highlighted how strong
organizational identity can act as a barrier to adapting to new technologies—one of the
internal barriers to reconfiguration described in the article.
, The "barrier model" of adaptation, as described in the article, is a framework that identifies
the challenges incumbent firms face when adapting to technological change. The model posits
that adaptation does not occur instantly and that frictions arise, preventing some firms from
seamlessly transitioning to a new technological regime. These frictions are termed barriers
because they obstruct the flow of technological and complementary resources both from
external sources into the firm and within the firm's boundaries. The model assumes that a firm
does not possess all the necessary resources to adapt successfully.
The "barrier model" identifies three types of barriers:
1. External Barriers:
These barriers hinder the acquisition of new knowledge and resources from outside the
firm. This can occur due to:
o Stakeholder constraints: For example, analysts discouraging investment in
new technologies that lie outside a firm's core competencies.
o Resource scarcity in the external environment: Resources may be controlled
by competitors.
2. Internal Barriers to Assimilation:
These barriers prevent the successful integration of new resources into the
organization, even if the firm has access to them. Examples include:
o "Not Invented Here" (NIH) syndrome: A rejection of external knowledge
acquisition.
o Lack of absorptive capacity: The inability to recognize, assimilate, and apply
the value of new information.
3. Internal Barriers to Reconfiguration:
These barriers impede the reorganization and integration of resources to capitalize on
new opportunities, even when the firm possesses both knowledge and resources. This
can happen due to:
o Lack of incentives to adapt operations: For instance, when existing
customers do not value the new technology.
o Internal resistance to new business models: Resistance to reorganizing the
firm's operations.
o Political processes within the firm: These processes may fail to produce the
correct cognitive frameworks.
The three barriers assume that firms do not initially possess the necessary core or
complementary resources for successful adaptation. In reality, firms may possess relevant
resources ex ante through exaptation, where existing resources are repurposed for new
functions. The article highlights that the literature often overlooks the dynamic nature of
resources, including how their value can diminish over time.
