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Authors such as Galbraith (1952) and All (1994) build on Schumpeter's basic arguments and suggest that large firms have many advantages over small ones in their ability to produce radical innovations. They note that large firms enjoy economies of scale in research and development, can spread risks widely, and have greater access to financial resources. Other researchers argue that, as firms become large, they become more bureaucratic, slower to react, and less willing to take risks (e.g., Mitchell and Singh 1993). As a result, they are less likely to produce radical innovations than smaller firms that do not possess these handicaps. These two views are contradictory. In addition, some authors suggest that the relationship between innovative productivity and size is bell-shaped (e.g., Ettlie and Rubenstein 1987). Medium-sized firms are positioned best for radical product innovation, because unlike small firms they possess the critical mass for research but do not suffer from the bureaucratic inertia of large firms. Conversely, Pavitt (1990) argues for a U-shaped curve. He suggests that the "proportions of significant innovations made by both large and small firms have been increasing at the expense of the medium-sized firms in between" (p. 23). Perhaps medium-sized firms have the liabilities of large and small firms and few of their strengths.
We argue that an important factor separating many radical product innovators from other firms is the willingness of the former to cannibalize their own investments. Willingness to cannibalize refers to the extent to which a firm is prepared to reduce the actual or potential value of its investments. It is an attitudinal trait of the key decision makers of the firm and resides in the culture, or shared values and beliefs, of the firm (Deshpande and Webster 1989). |
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