Non-market strategy and the risk of second order path dependence in the commercialization of cleantech
Type
discussion paper
Date Issued
2010-12-04
Author(s)
Abstract
The challenges that large incumbent firms face in making sense of innovation has been a recur-ring theme (Tushman & O’Reilly 1996, Sharma 1999, Chesbrough 2000, Day & Schoemaker 2000, Burgelman 1984, Henderson & Clark 1990, Christensen & Bower 1996, Miles & Covin 2002, Teppo & Wüstenhagen 2011). While challenges are numerous, there has also been a wealth of recommendations that can help the management of incumbent firms to avoid those pitfalls. The toolbox for managing innovation in large firms includes working together with external venture capitalists (Chesbrough 2000), creating a “radical innovation hub” (Leifer 2001) or establishing boot camps far away from corporate headquarters. Also, it has been suggested that large firms team up with small firms, a strategy that may be particularly appropriate when dealing with eco-innovation because of the environmental credibility of smaller firms and their ability to challenge existing business models (Hockerts and Wüstenhagen 2010). On an aggregate level, the challenges of large firms to deal with innovation lead to path dependence (North 1990), and lock-in effects (Unruh 2002). One specific feature of eco-innovation is the double externality problem (Rennings 2000), i.e. the environmental benefits cannot be fully appropriated by the innovating firm and its customers. This can basically be overcome by environmental regulation, which aims at internalizing externalities. Because environmental markets are characterized by regulatory risk and opportunity, the ability to manage those risks through effective non-market strategies has become a key element of successful corporate strategy. The problem is that large firms are now facing a second order path dependence problem. Not only are they entrenched with their existing market strategy and a network of existing customers and suppliers, but also with their non-market strategy and a dense network of stakeholders in the policy arena. As a consequence, even firms whose top management has succeeded in overcoming the first-order challenges of corporate venturing may eventually fail unless they find ways of successfully overcoming the path de-pendence in their firm’s non-market strategy.
Language
English
HSG Classification
contribution to scientific community
Publisher
University of St. Gallen
Publisher place
St. Gallen
Subject(s)
Contact Email Address
rolf.wuestenhagen@unisg.ch
Eprints ID
263997
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open.access
Name
Wuestenhagen_2nd_Order_PathDependence.pdf
Size
109.19 KB
Format
Adobe PDF
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