The incumbent's curse? Incumbency, size, and radical product innovation

A common perception in the field of innovation is that large, incumbent fir ms rarely introduce radical product innovations. Such firms tend to solidif y their market positions with relatively incremental innovations. They may even turn away entrepreneurs who come up with radical innovations, though t hey themselves had such entrepreneurial roots. As a result, radical innovat ions tend to come from small firms, the outsiders. This thesis, which we te rm the "incumbent's curse" is commonly accepted in academic and popular acc ounts of radical innovation. This topic is important, because radical produ ct innovation is an engine of economic growth that has created entire indus tries and brought down giants while catapulting small firms to market leade rship. Yet a review of the literature suggests that the evidence for the in cumbent's curse is based on anecdotes and scattered case studies of highly specialized innovations. It is not clear if it applies widely across severa l product categories. The authors reexamine the incumbent's curse using a h istorical analysis of a relatively large number of radical innovations in t he consumer durables and office products categories, In particular, the aut hors seek to answer the following questions: (1) How prevalent is this phen omenon? What percentage of radical innovations do incumbents versus nonincu mbents introduce? What percentage of radical innovations do small firms ver sus large firms introduce? (2) Is the phenomenon a curse that invariably af flicts large incumbents in current industries? Is it driven by incumbency o r size? and (3) How consistent is the phenomenon? Has the increasing size a nd complexity of firms over time accentuated it? Does it vary across nation al boundaries? Results from the study suggest that conventional wisdom abou t the incumbent's curse may not always be valid.