Institutions and Innovation
Description
The first track examines the effect of the firm's institutional environment upon its ability to respond to innovation opportunities. While much of the academic literature documents the problems incumbent firms encounter when innovation occurs, Chesbrough finds that firms in different environments have different experiences. In particular, he finds that incumbent Japanese firms in the hard disk drive industry often are able to adapt to innovations that displace many US incumbent firms. To understand this difference, he compares the underlying institutional environment disk drive firms face in the US vs. Japan, with particular attention to the labor market, the venture capital market, and the structure of buyer-supplier ties. He attributes the displacement of US incumbents to the rapid entry of new startup firms in response to innovation opportunities, often utilizing highly capable engineers raided from incumbent firms, funded by venture capital, which then sell to leading customers in the industry. Japanese incumbent firms find that the hazards posed by these startup firms are greatly reduced in the Japanese institutional environment.