Market motives, distinctive capabilities, and domestic inertia: A hybrid model of innovation generation

The authors develop and test a model of innovation in which the generative process of innovation is fostered by a balance of three forces: market moti ves, distinctive capabilities, and domestic inertia. The authors distinguis h between potential and realized competition and, focusing on interinnovati on duration as the dependent variable, develop hypotheses to capture the ef fects of competition, feedback from the marketplace, and product characteri stics on innovation dynamics. Weekly diffusion and innovation data for 11 c omputer software products available on the Internet, involving more than 10 0 new versions in the period 1991 to 1994, are used to test the hypotheses. Model comparison tests provide strong support for the hybrid model over mo dels based on restricted conceptualizations. Domestic inertia consideration s explain 45% of the variance in interinnovation duration, and market motiv es and distinctive capabilities explain 33% and 22%, respectively. The auth ors support the expectation of a U-shaped effect of potential competition a nd find that realized competition increases interinnovation duration. Produ cts that are more customer-driven witness faster innovation, and the diffus ion rate of a current innovation plays a significant role in future innovat ive activities: It moderates the effect of potential competition and intera cts with product bundling to delay innovation. Furthermore, the authors fin d that product bundling per se does not influence innovation activities and that, when a product is enjoying a high rate of diffusion, competition doe s not hasten the arrival of innovations.