Innovations and the role of complementarities in a strategic theory of the firm

Abstract

In the resource‐based view of strategy and in evolutionary economics, complementary assets play a crucial role in explaining sustainable competitive advantages and innovations. Despite the apparent importance of complementary assets for the understanding of corporate strategy, their creation and the associated managerial problems have been much less discussed. We believe this to be a major weakness in the strategic theory of the firm. Interestingly, problems of coordination and cooperation are center stage in the contract‐based theories of the firm, and we try to integrate some of their insights into a resource‐based perspective. Specifically, we show how complementary assets raise the need for strategic direction by a firm's top management. Moreover, complementary assets magnify internal incentive problems, and their management has an impact on the innovativeness of a firm. Lastly, complementary assets play a crucial role in the internal appropriation of innovative rents. We demonstrate the fruitfulness of our integrated framework by relating some of our findings to the literature on corporate strategy, industry evolution, and organizational structures. Copyright © 2007 John Wiley & Sons, Ltd.

Modern Resource-Based Theory(ies)

“…The interconnectedness of asset stocks relate to complementarities among two or more resources (Stieglitz & Heine 2007). The value of an asset stock depends on the presence of complementary resources, sharply increasing the investment costs for an imitator (Ghemawat 1991).…”

“…After the discovery of a potentially value-creating resource combination, firms proceed to its refinement and modification (Siggelkow & Levinthal, 2003;Stieglitz & Heine 2007;Stiegliz & Foss, 2009). Hence, what the cognitive representation fundamentally represents is the entrepreneurial expectation and speculation about more attractive regions in the resource space, what Foss, Foss and Klein (2007) call "judgment.…”

Characteristics of Innovations in Companies: Comparison of Croatia and Slovenia

“…In the literature, the analysis and understanding of this phenomenon are quite extensive. The literature (Stieglitz & Heine, 2007;Hill & Rothaermel, 2003;Van de Ven, 1986) distinguishes a wide range of innovation types within a company (product/process, radical/incremental, technological/managerial, market pull/technology push, or competence-enhancing/competence-destroying). The adoption of an innovation includes "generation, development, and implementation of new ideas or behaviours" (Damanpour, 1991).…”

Continuity and change in interorganizational project practices: The Dutch shipbuilding industry, 1950–2010

“…With regard to complementarity effects, interaction between separate but interrelated practices creates synergy (Stieglitz & Heine, 2007). The benefits of repeatedly combining interrelated practices do not simply add up, but create an additional surplus.…”