Journal
STRATEGIC MANAGEMENT JOURNAL
Volume 35, Issue 1, Pages 126-145Publisher
WILEY
DOI: 10.1002/smj.2097
Keywords
R&D expenditure volatility; proactive R&D management; exploitation; exploration; punctuated equilibrium
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A common perspective is that consistent R&D investment facilitates innovation, while volatile spending implies myopic decision making. However, the benefits to exploiting extant competencies eventually erode, so firms must disrupt their R&D function and explore for new competitive advantage. We suggest that high-performing firms recognize when extant competencies decline and increase exploratory R&D to develop new competencies at the appropriate time. We find that changes in R&D expenditure away from the firm's historic trend, in either direction, are indicative of transitions between exploitative and exploratory R&D and are associated with increased firm performance. Increases in R&D expenditure above the trend are associated with an increased likelihood of highly cited patents, suggesting that firms are making the leap between R&D-based exploitation and exploration. Copyright (c) 2013 John Wiley & Sons, Ltd.
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