Jaideep Prabhu

Sources and Financial Consequences of Radical Innovation: Insights from Pharmaceuticals

Radical innovations are engines of economic growth and the focus of much academic and practitioner interest, yet some fundamental questions remain unanswered. The authors use theoretical arguments on the risk associated with radical innovations, and the resources needed for them, to answer the following questions on the sources and financial consequences of radical innovation: (1) Who introduces a greater number of radical innovations: dominant or nondominant firms? (2) How great are the financial rewards to radical innovations, and how do these rewards vary across dominant and nondominant firms? (3) Is it only a firms resources in the aggregate or also its focus and leverage of resources that make its innovations more financially valuable? and (4) Which are more valuable: innovations that incorporate a breakthrough technology or innovations that provide a substantial increase in customer benefits? The authors pool information from a disparate set of sources in the pharmaceutical industry to study these questions. Results indicate that a large majority of radical innovations come from a minority of firms. The financial rewards of innovation vary dramatically across firms and are tied closely to firms’ resource base. Firms that provide higher per-product levels of marketing and technology support obtain much greater financial rewards from their radical innovations than do other firms. Firms that have greater depth and breadth in their product portfolio also gain more from their radical innovations.

The Impact of Acquisitions on Innovation: Poison Pill, Placebo, or Tonic?

Do acquisitions increase, decrease, or have no effect on innovation? The empirical research on this question suggests that acquisitions may hurt innovation; that is, they may be a “poison pill” for innovation. The authors present an alternative view. For firms that first engage in internal knowledge development, the knowledge-based view the authors present suggests that acquisitions can help innovation; that is, they can be a tonic for innovation. Analysis of cross-sectional, time-series data on a sample of pharmaceutical firms during 1988–97 provides evidence to support the thesis.

Service innovation in the digital age: key contributions and future directions

Over the last decade, there has been an increasing focus on service across socioeconomic sectors coupled with transformational developments in information and communication technologies (ICTs). Together these developments are engendering dramatic new opportunities for service innovation, the study of which is both timely and important. Fully understanding these opportunities challenges us to question conventional approaches that construe service as a distinctive form of socioeconomic exchange (i.e., as services) and to reconsider what service means and thus how service innovation may develop. The aim of this special issue, therefore, is to bring together some of the latest scholarship from the Marketing and Information Systems disciplines to advance theoretical developments on service innovation in a digital age.

What Will the Future Bring? Dominance,Technology Expectations, and Radical Innovation

Are dominant firms laggards or leaders at innovation? The answers to this question are conflicting and controversial. In an attempt to resolve conflicting answers to this question, the authors argue that dominance is a multifaceted construct in which individual facets result in differing (and countervailing) propensities to innovate. To identify the overall effects of dominance, it is necessary to consider the effects of these facets taken together. The authors also study a hitherto ignored yet important driver of innovation, technology expectations, and show that managers have widely divergent expectations of the same new technology. Furthermore, even when their expectations are the same, managers of dominant firms display investment behavior at odds with their counterparts at nondominant firms. The authors use a triangulation of research methods and combine insights from lab studies with those from field interviews, archival data, and a survey of bricks-and-mortar banks’ responses to Internet banking.

From Invention to Innovation: Conversion Ability in Product Development

The ability to convert inputs into outputs is a critical determinant of success in many fields of endeavor. In this research, the authors study the ability of firms to convert ideas into products, that is, their conversion ability. Specifically, they address the question, Why are some firms better at conversion than others? In contrast to much of the existing literature, the authors propose that a strong focus on speed and on generating many ideas may actually hurt firms by lowering their conversion ability. The authors test their arguments on data between 1960 and 2001 from a cross-national sample of pharmaceutical firms. They find that firms vary widely in their ability to convert promising drug ideas into launched drugs. Firms with the highest conversion ability are those that (1) focus on a moderate number of ideas, in areas of importance, and in areas in which they have expertise and (2) deliberate for a moderate length of time on promising ideas.

Strategy based segmentation of industrial markets

Abstract Segmentation of industrial markets is typically based on observable characteristics of firms such as their location and size. However, such variables have been found to be poor predictors of industrial buying behavior. To improve the effectiveness and power of existing approaches to industrial market segmentation, we propose using unobservable characteristics such as organizational strategy in addition to the observable characteristics currently used. An important justification for our approach is that a firm’s strategy influences its behavior, especially its buying behavior; as a result, adding the strategic type and orientation of firms to a segmentation scheme is bound to improve the effectiveness of the scheme. To test the effectiveness of our approach, we conducted an empirical study of the purchase of car phones by 200 Dutch firms. The results support our predictions. In fact, they indicate that a firm’s strategy is an even more important determinant of industrial buying behavior than the variables currently used. Thus, strategy-based segmentation may be a more powerful and effective approach to industrial segmentation than current approaches.

The Antecedents and Consequences of Affordable Value Innovations for Emerging Markets

Emerging markets offer tremendous growth opportunities for firms. While established multinational firms typically focus on premium segments in emerging markets, they often fail to leverage additional growth opportunities in so-called good enough or low-income segments in emerging markets. Customers in these low-income markets have substantially different requirements and are very price sensitive. Theoretical and case-based research suggests that innovating for these low-income segments in emerging markets differs significantly from innovating for premium or traditional Western markets. We argue that tapping successfully into low-income segments in emerging markets requires the development of new products that meet the low price expectations while at the same time offering also value to customers in these segments. We refer to these new products as affordable value innovations. We analyze the antecedents of affordable value innovation for emerging markets. We draw on institutional theory to derive three potentially relevant antecedents of affordable value innovation for emerging markets. These are bricolage, local embeddedness, and standardization. We test our hypotheses using multiple informant data from 47 multinational corporations involving 103 innovation projects that target low-income customers in emerging markets. Our empirical analysis shows that all three antecedents have significant effects on the level of affordable value innovation: while bricolage and local embeddedness are positively related to the level of affordable value innovation, standardization has a negative impact. We also examine the relationship between the level of affordable value innovation and performance. We find evidence for our basic assumption that a firms capability to develop and launch affordable value innovations is key to success in emerging markets. It indicates that a firms investments in affordable value innovations for emerging markets pay off financially. Finally, a cross-regional comparison of our data shows that the key findings on antecedents of affordable value innovation and its impact on performance do not vary across various emerging markets. Overall, our findings offer important implications for research on and the practice of innovation for low-income segments in emerging markets.

The democratizing effects of frugal innovation

Purpose – The aim of this paper is to examine the impact of frugal innovation in the fields of livelihood provision, education, infrastructure, and distribution networks on state-building in countries where a significant proportion of the population lives at the base of the pyramid (BoP). Design/methodology/approach – The paper reviews the literature on frugal innovation, democratization and state-building, offers practical examples in support of the conceptual arguments, and provides research propositions for empirical assessment. Findings – The paper provides support for the notion that the creation of more inclusive markets through frugal innovation contributes to socio-economic development, which in turn strengthens democratization and state-building. Practical implications – Multinational corporations can have a positive impact on democratization by offering for-profit products and services to serve BoP markets. Originality/value – The paper provides novel insights into the role that frugal innovatio...

Causal recipes for high performance

Purpose – The purpose of this paper is to explore and compare causal recipes for high performance among young Indian and UK firms in high-tech industries. Design/methodology/approach – The traditional configuration approach suggests using the leadership, strategy, structure, and environment domains to identify configurations. In response to calls to improve causal linkages, and drawing on work on start-ups’ configurations, entrepreneurial orientation is used with these four domains to identify configurations. Fuzzy-set qualitative comparative analysis is used to analyze data collected via questionnaires from 70 Indian and 21 UK young firms. Findings – In all five configurations identified in UK context, firms adopt high external integration, and employ inorganic development strategies, exhibit high internal integration, or do not operate in a highly competitive industry. These firms carve out niches, enjoy strong linkages with supply chain partners, and have strong enough reputations that their environmen...

The importance of building a culture of innovation in a recession

Purpose – The purpose of this paper is to determine how corporate culture can be harnessed to foster radical innovation in a recession.Design/methodology/approach – The paper uses the findings of a survey and archival data from 750 public firms in various manufacturing industries across 17 major economies of the world in 2003‐2004. The firms in the sample come from developed economies such as the USA, UK, Germany and Japan, as well as developing economies such as China and India, thus allowing the comparison of the drivers of innovation across very different national contexts.Findings – The paper finds that, if certain attitudes, practices and behaviours are shared by members of a firm, it is more likely to have a forward‐looking, risk‐taking culture.Practical limitations/implications – Managers can benchmark their corporate culture against three crucial attitudes and three related practices.Originality/value – Previous studies have focused on how national policies drive innovation; the paper challenges t...