Entrepreneurial tweaking: An empirical study of technology diffusion through secondary inventions and design modifications by start-ups

May 7, 2013 Editor 0

Abstract

Purpose – Existing theories of innovation posit a split between incremental innovations produced by large incumbents and radical innovations produced by entrepreneurial start-ups. The purpose of this paper is to present empirical evidence challenging this foundational assumption by demonstrating that entrepreneurs play a leading role, not a subordinate role, in sourcing incremental innovations through secondary inventions and design modifications.

Design/methodology/approach – Applying the methods of historical econometrics, this study draws parallels between two dramatically different contexts: the mechanized reaper (1803-1884) and cloud computing services (1961-2011). Data for the reaper were drawn from 517 historical sources involving 348 modifications. Data for cloud computing services were drawn from 3,882 US patent filings and firm-level data drawn from the Dun & Bradstreet database.

Findings – Entrepreneurial tweaking plays a central role in commercializing dominant designs. Among the highest-ranked incremental innovations leading to the commercialization of the reaper and cloud computing, nearly 90 percent were attributable to entrepreneurs. And yet, an entrepreneur had only a one in fourteen chance of garnering returns from a reaper innovation and a one in nine chance of gains from a cloud computing improvement.

Practical implications – Incremental innovations by entrepreneurs are indispensable to the widespread commercial acceptance of new technologies. Yet, entrepreneurial tweakers rarely benefit from the significant value they have created. Originality/value – This paper constitutes the first significant attempt to empirically address the central role of entrepreneurs in producing incremental innovations that result in the commercialization of radical breakthroughs.
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Categories: Innovation

Tags: Cloud computing, entrepreneurial tweakers, incremental innovations, secondary inventions and design modifications