UNBUNDLING COMPETITIVE HETEROGENEITY: INCENTIVE STRUCTURES AND CAPABILITY INFLUENCES ON TECHNOLOGICAL INNOVATION

Many studies argue that the continual creation of new ideas by small and young firms steadily destroys the competitive positions of their larger, more established rivals. Despite this attention, empirical results relating firm size to innovation remain exceedingly fragile. This study proposes three reasons for the empirical inconsistencies it? the literature: that small and large firms differ in their: (1) stock of technological experiences, (2) use of own- and partner-firm experiences, and (3) abilities to translate own- and partner-firm experiences into innovation activity. Results from a 10-year study of 463 semiconductor firms demonstrate that the mixed findings generated front prior work are partially attributed to these three general propositions. It? particular, resource flows, in the form of operating experience developed internally and accessed through codevelopment partners, positively affect innovation activity; but these benefits diminish as a firm increases in size. The findings broadly support the notion that differences in the incentives and abilities of small and large firms give rise to heterogeneity in the firms' innovation activity. Copyright (C) 2008 John Wiley & Sons, Ltd.