Policy Seminars -- Winter 2008
| Speaker: Rahul Kapoor -- INSEAD |
| Topic: What Firms Make vs. What They Know: How Firms’ Production and Knowledge Boundaries Affect Competitive Advantage in the Face of Technological Change |
| Date/Place/Time: January 23, 2008 / UCLA Anderson School -- Cornell Hall D307 / 10:15 A.M. to 11:45 A.M. |
| Abstract: Product innovations are often enabled by changes in components. We examine how firms' ability to manage such changes depends on their governance strategies, their knowledge of components, and the nature of technological change. Using data on all firms in the DRAM industry across 12 technology transitions from 1974 to 2005, we find that vertically integrating into component production improves firms’ ability to manage technology transitions. Although non-integrated firms have lower performance, this effect is muted by the firms’ component knowledge. Moreover, the relative advantage of extending production vs. knowledge boundaries is determined by two factors. The first is the nature of technological change – integrated firms have a greater advantage over non-integrated firms when innovation is architectural than when it is incremental. The second is the degree of integration – non-integrated firms derive greater benefit from their knowledge of external components than do integrated firms. Our results clarify the conditions under which extending knowledge boundaries can be a substitute for extending production boundaries in managing technological change. |
| Links to papers: Click here for paper |