Looking Beyond the Focal Industry and Existing Technologies for Radical Innovations

Abstract

The “radicalness” of an innovation is often contingent upon access to distinct technologies which arise from sourcing innovation outside a firms' focal industry (exterior sourcing). We posit that exterior sourcing leads to technology distinctness and that the presence of technology distinctness significantly affects the relationship between exterior sourcing and radicalness. In addition, we assert that high technology distinctness results in a stronger association with radicalness irrespective of the levels of exterior sourcing. Further, at lower levels of exterior sourcing, technology distinctness will have a stronger relationship with radicalness than at higher levels of exterior sourcing. We also argue that high technology distinctness and low exterior sourcing will have the strongest relationship with radicalness. We used patent filings from 1996 through 2009 from the IT industry from within the S&P-500 database to test our assertions. The empirical evidence validated our affirmations. Our findings suggest that to maximize the chance of radical innovations, firms must obtain highly distinct technologies from minimum possible contacts outside their focal industry. We conclude the paper by summarizing the key findings, discussing implications for theory and practice, and suggesting avenues for future research.

Keywords: Exterior sourcing, Patents, Radical innovations, Technology distinctness, Technology, Innovation