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Incremental and Radical Innovation by U.S. Automobile Manufacturers, 1885-1981: An Ecological Perspective

Despite growing consensus that different types of technological innovations emerge from different paths and have differing effects on an organization’s behavior and performance, there has been little conceptual and empirical work on how (organizational) ecological processes influence the rate of occurrence of different types of innovation, such as incremental or radical innovation, and their consequences for organizational performance. We predict that organizational scope and niche crowding increase the rate of incremental innovation, while prior experience in another industry lowers the rate of both incremental and radical innovation. Further, we argue that while innovation itself may improve an organization’s survival chances, the simultaneous occurrence of radical innovation with other organizational changes, such as a change in market position, is likely to lower the organization’s survival chances. Our results are consistent with the implications of a cascading model of organizational change with incremental innovations providing survival benefits and radical innovations lowering survival chances when they occur jointly with market position change. Using longitudinal data on all American automobile manufacturers from 1885-1981, we find substantial support for our predictions.