Disruptive Innovation in Public Service Sectors: Ambidexterity and the Role of Incumbents

The theory of Disruptive Innovation predicts that incumbent firms with traditional leadership roles often fall prey to new entrants encroaching upon their market with simpler, more affordable or more accessible offerings. Inspired by examples from the higher education, health care and space sectors, this study advances the counterargument that incumbent organizations in public service sectors may avoid the dynamics of Christensen's Innovator's Dilemma and instead become leaders in potentially disruptive innovation activities themselves. The paper explores two possible explanations for the observed incumbent behaviour. The first explanation is that the public sector characteristics of these fields - including a simultaneous high need for and high barriers to innovation - may play a key role in explaining why the observed examples run counter to established theory. The second explanation is that incumbents engaged in Disruptive Innovation thrive because they demonstrate organizational ambidexterity by exploring new opportunities while exploiting established capabilities, and by differentiating the organization into specialized units while also integrating the organization as needed. The paper points to theoretical and empirical gaps in the literature of Disruptive Innovation regarding incumbent behaviour and innovation dynamics in the public sector, and outlines future work necessary to fill these gaps.