Why Put All Your Eggs in One Basket? A Competition-Based View of How Technological Uncertainty Affects a Firm’s Technological Specialization

Puay Khoon Toh () and Taekyu Kim ()
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Puay Khoon Toh: Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455
Taekyu Kim: Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455

Organization Science, 2013, vol. 24, issue 4, 1214-1236

Abstract: Conventional wisdom suggests that when a firm faces technological uncertainty, it responds by becoming less technologically specialized so as to remain adaptable to subsequent resolution of this uncertainty. We adopt a competition-based view of technological uncertainty to identify an opposite effect in competitive settings: the firm may instead become more specialized when faced with greater technological uncertainty so as to focus on advancing its technologies against competition and influence the resolution of uncertainty in its favor over rivals. We propose that this effect is accentuated when the firm expects that it cannot easily adapt to rivals’ technologies subsequently, specifically when rivals are a greater deterrent through being litigious or innovative. Using U.S. government funding for fuel cell research as a policy shock, with stock option-implied volatilities to measure expected uncertainty, we find empirical support for our propositions among firms active in research and development in the U.S. communications equipment industry. Through these findings, we demonstrate that a competition-based view of uncertainty identifies an alternative path for the firm’s resource accumulation under uncertainty, and we stress that the resolution of uncertainty can be something the firm attempts to influence rather than adapt to.

Keywords: technological uncertainty; technological specialization; competition; innovation (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (23)

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