Academic journal article Innovation: Organization & Management

How Do Firms Innovate with Limited Resources in Turbulent Markets?

Academic journal article Innovation: Organization & Management

How Do Firms Innovate with Limited Resources in Turbulent Markets?

Article excerpt

Box, Inc., is a golden child among Silicon Valley start-up tech companies these days. Investors have confidence that Box is successfully tapping into the enterprise cloud-computing market, which is a fast-paced setting with an annual dou- ble- digit growth rate. Box's daily battles are with industry behemoths like Google, Oracle, IBM, and the biggest of them, Microsoft. Microsoft's collaboration tool SharePoints is currently serv- ing more than 65,000 companies in this crowded market; however, there is a broad sense that they are falling behind. Disenchanted customers have begun to migrate to Box (Markowitz, 2014). The question is - how does Box do it? As a start-up company, how does it conceptualize and manage its limited resources to perform better than indus- try behemoths, like Microsoft, in highly competi- tive cloud-computing market? We are interested in studying this question and the following research is a step towards finding the answers...

The story of Box, Inc., is not unusual in tur- bulent markets, where firms mainly focus their efforts on game-changing radical innovation prac- tices. Compared to other forms of innovation, radical innovation embeds new technologies, addresses emerging trends, and represents discon- tinuities for the market (Wind & Mahajan, 1997). Radical innovation can propel small new firms into a position of industry leadership, as in the case of Box, and can bring down large established companies that fail to meet the emerging needs of customers, as with Microsoft (Chandy & Tellis, 2000; Srinivasan, Lilien, & Rangaswamy, 2002). Although there are anecdotal evidences that small new firms with limited resources can challenge the status quo of industry leaders, there has been little research on resource-limited innovation, and how it happens in turbulent markets.

In this paper we explore this resource-limited innovation phenomenon. Our research is orga- nized around the question of how firms radically innovate tvith limited resources. In order to avoid too much complexity, the boundary condition is startups in turbulent markets. Startups, by default, have limited resources1; and the ones that com- pete in turbulent markets with radical innovation offerings (e.g., Box) are even more resource- limited because changes in demand, competition, and technology are so fast and discontinuous that resources to innovate are either unavailable or quickly become obsolete (Eisenhardt, 1989; Katila & Shane, 2005; Shane, 2001).

To begin exploring this phenomenon, we con- ducted comparative case studies at 10 startup companies in several turbulent markets. There are two main findings from this study. First, the evidence suggests that the value of a resource depends on the context in which it is used. Second, we found that four organizational atti- tudinal factors - namely: intention, inspiration, integration, and indefatigability - moderate the relationship between resources and innovation performance (see Figure 1). These factors enable companies to prioritize and reconfigure resources for positive innovation outcomes. Our finding that resource limitation, managed with these four attitudinal factors, can be enabling is intriguing. These attitudinal factors, while potentially impor- tant to innovation in general, appear to be even more salient in the context of resource-limited innovation. This is an important nuance in our research, which needs emphasis. That is, these factors represent the catalysts that help companies both overcome the seemingly negative effects, as well as extenuate the positive aspects, of having limited resources. In essence, these factors affect innovation outcomes positively by building lean innovation capability; and, thereby encouraging companies to use what resources are available in creative ways. They help companies to reallocate and reprioritize important resources. Briefly, the findings of the study show that resource limita- tion may seem to be a negative condition, when in fact it is not - and in fact may lead to positive results, if managed wisely. …

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