factors differentiating the commercialization of ...€¦ · creation and new competency generation...

IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 4, NOVEMBER 2002 375

Factors Differentiating the Commercialization ofDisruptive and Sustaining Technologies

Suleiman K. Kassicieh, Member, IEEE, Steven T. Walsh, Member, IEEE, John C. Cummings, Paul J. McWhorter,Alton D. Romig, and W. David Williams

Abstract—The nature of disruptive and sustaining technologiesis sufficiently different to require different activities for thecommercialization of these technology categories. Few theoristshave developed conceptual schemes about the different methodsof commercializing these technologies. The authors take the firststeps in investigating these differences by contrasting firms thatcommercialize disruptive technologies with those that commer-cialize sustaining technologies. They reveal major differences andanalyze these in terms of four major commercialization compo-nents: product realization, revenue generation, research support,and market potential. Several hypotheses regarding size of thefirm, its financial risk profile, and its R&D strategy are utilized.

Index Terms—Disruptive technology, technology commercial-ization, technology management factor analysis.

I. INTRODUCTION

A LTHOUGH it is widely believed that the two majorcategories of technologies are disruptive and sustaining,

few theorists (Tushmanet al. [34], Bower and Christensen[4], Veryzer [37]) have demonstrated that firms utilize dif-fering methods to commercialize these different technologies.Traditionally, commercialization activities were treated assimilar whether the new technology incrementally improvedan existing product, process, and service or disruptively intro-duced a new technology that had a major effect on the marketand/or customer behaviors and benefits (Usher [36], Mansfield[21]). This paper seeks to provide an empirical basis for thesedifferences.

This paper differentiates between the commercialization ac-tivities of disruptive and sustaining technologies. It tests dif-ferences in activities and decision-making processes that affectthe commercialization efforts of these technologies. This studyhelps to provide a basis for a commercialization decision frame-work so as to help R&D organizations move scientific discoveryto a commercial arena. It also supports commercial organiza-tions in defining a methodology for analyzing their involvementin bringing disruptive technologies into successful discontin-uous innovations.

We test several hypotheses, which are designed to highlightfirm differences in commercializing disruptive and sustainingtechnologies. We will highlight activities and factors that

Manuscript received December 2000; revised July 2002. Review of this man-uscript was arranged by Special Issue Editor B. A. Kirchhoff.

S. K. Kassicieh and S. T. Walsh are with the Anderson Schools of Manage-ment, University Of New Mexico, Albuquerque, NM 87131 USA.

J. C. Cummings, P. J. McWhorter, A. D. Romig, and W. D. Williams are withSandia National Laboratories, Albuquerque, NM 87185 USA.

Digital Object Identifier 10.1109/TEM.2002.807293

firms utilize when commercializing disruptive technologies.To test these hypotheses, we use one of the emergent andpotentially disruptive technologies in which Sandia NationalLaboratories are involved. This nascent disruptive technologyarea is micro-electro mechanical systems (MEMS), sometimesreferred to as Microsystems, or Top Down Nanotechnology.We survey a number of companies that have investigatedSandia’s technological discoveries for potential use in anindustrial capacity. The survey will focus on the movement ofthe research findings from the laboratory into the market placeand all of the problem areas that disruptive technologies face inthis arena. The survey data will be described with results andconclusions reported.

II. DISRUPTIVE TECHNOLOGIESDEFINED

Disruptive technologies are scientific discoveries that breakthrough the usual product/technology capabilities and provide abasis for a new competitive paradigm, as described by Andersonand Tushman [2], Tushman and Rosenkopf [35], and Bower andChristensen [4]. Discontinuous innovations are products, pro-cesses, and/or services that provide exponential improvementsin the value received by the customer much in the same vein(Walsh [39], Lynnet al. [20], and Veryzer [37]). Walsh andLinton [41] reported on the definitions used by different au-thors to describe the business strategy focus they used to de-fine disruptive technologies. These definitions are classified bya number of business strategy parameters used to describe dis-ruptive technologies.

Disruptive technologies and discontinuous innovationspresent a unique challenge and opportunity for R&D organi-zations seeking to decide on their R&D investments and formanufacturing organizations devising plans for their commer-cialization efforts and meeting the challenge to reinvent thecorporation. These technologies do not have a proven path fromscientific discovery to mass production and, therefore, requirenovel approaches although they are the wellspring of wealthcreation and new competency generation for the firms thatintroduce such innovations. Many firms, especially the largerones, seem reluctant to familiarize themselves with these tech-nologies quickly. The trend seems to be that these firms preferto react to a proven disruptive technology that has changedthe product market paradigm. As a result, the community ofcorporate customers does not readily accept them until they areproven, an event that usually means corporate customers arelate entries into the market.

Tushmanet al. [34], for example, presented the idea of atechnology cycle where technological discontinuities, sub-

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376 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 4, NOVEMBER 2002

stitution of technologies, dominant designs, and incrementalchange are part of an iterative technology cycle. This cycleimplies that firms need to have organizations that have dualresponsibilities: maintain the current production system withsmall incremental changes while at the same time look forthe major breakthroughs. The “ambidextrous” organizationallows the firm to bring in the resources while at the sametime building new products. Anderson and Tushman [2] haddeveloped the idea of discontinuities and their relationship todominant designs. Glasmeier [11] presented the effect that anew discontinuous innovation, quartz technology, had on themechanical movement Swiss watch industry.

III. COMMERCIALIZATION OF DISCONTINUOUSINNOVATION

BASED ON DISRUPTIVE TECHNOLOGIES

Commercialization has not been totally overlooked in themanagement of technology literature. Several examples makethis clear. Christensen [6], for example, states that largestfirms neglect discontinuous innovations and focus their re-sources on incremental change or continuous improvement.He presented the case of the hard drive manufacturers andhow incremental innovations and sustaining technologies werenot sufficient for survival when new disruptive technologieswere leapfrogging the price/performance parameters of theseincremental innovations. Riceet al. [30] reported on a jointproject with the Industrial Research Institute (IRI) where 11projects in nine companies were designated as “breakthrough”technologies. The focus of the project was to understand themanagement of high-risk projects associated with commer-cializing discontinuous innovations. Projects with a five to tentimes improvement in performance, 30%–50% reduction incost, and/or new-to-the-world performance were defined as“breakthrough” discontinuous innovations. An example of thecompanies and products used in the project is General Electricand its digital X-ray. The projects had common mechanismssuch as definition of a “holy grail,” establishment of ventureboards, internal requests for proposals, and scanning for ideasby groups and individuals.

Kaplan [13] presents strategies to take advantage of disrup-tive technologies. These strategies include radical cannibalismby replacing one’s own successful products with new productsthat represent a significant value increase for customers. An-other strategy is competitive displacement where you replaceyour competitors’ products with new significantly higher value-added products. The other two strategies are industry genesiswhere you start new industries and market invention where youcreate new demand.

Others have contrasted discontinuous innovation with con-tinuous innovation. Two examples are well known. Florida andKenney [9] argue that prior to the 1980s, the U.S. was noted forthe ability of its firms to develop new ideas and new products.The 1980s, however, focused attention on continuous improve-ments due to the disappointing performance of U.S. firms intechnology intensive markets such as consumer electronics,robotics, automobiles, and semiconductor memories. Thisfocus shifted attention from the disruptive technologies thathad helped the U.S. in leading the world in new breakthrough

technologies. Additional evidence that firms require morethan continuous improvement as a design and manufacturingstrategy is offered by Morone [25]. He found that successfulJapanese and U.S. firms in different industries were moresimilar to each other than to unsuccessful firms in the sameindustry. The successful firms, regardless of country of origin,achieved a competitive advantage over rival firms based ona combination of incremental and discontinuous innovation.However, none of these develops a strong empirical basis thatdemonstrates these differences. Therefore, we provide a basisherein.

IV. FIRM ACTIVITY AND DISRUPTIVETECHNOLOGY

Fig. 1 uses three distinct areas of change to define disruptivetechnologies. These areas are as follows.

1) Change in technology/product paradigm: these changesimpact the decisions a firm makes to commercialize aparticular product.

2) Change in market structures: these changes result in dif-ferent suppliers in the market and different outputs amongthe remaining suppliers.

3) Change in customer benefits: users/adopters have tochange their behavior in order to benefit for the use ofthe innovation.

Fig. 1 lists the different authors who have described the effectof disruptive technologies on these three areas of change. Thesechanges point to the need for a new decision framework forcommercialization decisions. An appropriate decision frame-work helps R&D organizations move scientific discovery to acommercial arena. It also supports commercial organizations indefining a methodology for analyzing their involvement in dis-continuous innovations. This decision framework is presentednext.

V. SOURCES OFDISRUPTIVE TECHNOLOGIES:R&D ORGANIZATIONS

Sandia is a world class R&D facility that faces the challengeof managing rapidly changing and interactive technologies andproducts. These technologies, although “high tech” in nature,are not always disruptive in nature. Herein, we divide them intosustaining technologies and disruptive technologies. Sustainingtechnologies follow a more continuous improvement market-focused process (Walsh and Kirchhoff [17]) and are applied tointernal and external customer problems that intensify ratherthan create new lab competence. Sustaining technologies canbe planned according to a technological roadmap and add valueto an established industrial value chain (Walsh and Elders [19]).

Disruptive technologies, on the other hand, follow a morediscontinuous innovation path (Walsh and Kirchhoff [17])requiring a market-development or expeditionary marketingapproach (Prahalad and Hamel [28]) rather than the market-focused approach (Porter [29]) utilized more effectively withsustaining technologies (Linton [19]). When deriving valuefrom these technologies, the exact placement of the disruptivetechnology in an existing industry value chain is not clear.Technological roadmaps are very hard to construct for these

KASSICIEH et al.: FACTORS DIFFERENTIATING THE COMMERCIALIZATION 377

Fig. 1. Disruptive technology definitions focused on technology/ products/ markets/ customers.

technologies since the contribution to the industrial value chainis murky and the products are not so obvious. Traditionalmarket focus forces provide little aid in these areas.

Most firms, when faced with creating competitive advantagefrom disruptive technologies, revert back to an internally drivenapproach which can be successful but has a history of generatingmarketing myopia, not-invented-here syndrome, and the like.Sandia, however, perhaps due to the nature of the National Labs,where competency generation and creation is the more naturalstock and trade has initiated what we call a market developmentapproach.

Since the market-focused approach and the internallydriven approach have been around and are easily appliedto technologies where markets and customers exist, a newapproach is needed for disruptive technologies. This approachneeds to provide companies, in many application areas andtotally unrelated fields, with a way to experiment with the newtechnologies to determine how they can assist in developingnew products that diverge from the traditional demand for thecompany’s products. Many articles suggest differences in firmtypology [16] and firm activity [20] when commercializingdisruptive technologies. These differences depend on manyfactors and some are developed as follows.

a) Size of firm commercializing the technology:Small en-trepreneurial firms have been a driving force behind thecommercialization of disruptive technologies. Birch [3],Kirchhoff [16], and Reynolds [32] indicate that highly in-novative small firms create a majority of net new jobs inthe U.S. These firms are more agile and are better ableto deal with uncertainty than larger firms. Large firmshave also responded to the challenge of starting new areasof business. Cooper and Smith [7] describe how firms

that have a well-established product behave when a newtechnology threatens the dominance of their establishedproduct. In some cases, they conclude that the establish-ment of a new division to handle the new technology iswarranted. Christensen [6] points out Hewlett Packard’sexperience with the ink jet and the laser jet where the twocompeting technologies managed by two separate divi-sions netted a positive result. Refer to Fig. 2 for the dif-ferent details.

b) Technology Source: Kassicieh and Radosevich [14]noted that technology transfer and commercialization ofnew products from public-sector research organizationsare more likely to find their way to the market with morechannels of communications. This principle undoubtedlyapplies to disruptive technologies since the high level ofuncertainty attached to new-to-the-world technologiesrequires trial in many different industries and manydifferent products. Kirchhoff and Walsh [17] state thatmany times these disruptive technologies are exogenousboth to the firm and to the industry they are utilized in.We provide these in Fig. 3.

c) Risk of Involvement with New Technology: The risktaken by firms commercializing disruptive technologiesis far greater than the risk taken by firms working onsustaining market-driven technology commercialization.Firms who are not succeeding financially are more apt totake a chance on the disruptive technologies. (See Fig. 4.)

VI. COMMERCIALIZATION MODELS

Commercialization models depend on a variety of issuesthat define a market focus for product development or on


Fig. 2. Market approach based upon firm size and technology type.

Fig. 3. Market approach based upon technology source and type.

Fig. 4. Market approach based upon financial success, risk, and technology type.

a technology development perspective that develops newmarkets. These two foci depend on the existence of manyelements as described by various authors including Kassiciehand Radosevich [14], Von Hipple [38], and Lynn,et al. [20]:

1) scientific discovery;2) applications;3) products;4) government support/buyers;5) commercial support/suppliers/buyers;6) distribution channels;7) research support for new discoveries;8) research support for new applications;9) research support for new products;

10) buyers/market;11) real market growth;12) perceived/potential market growth.

This paper will test how these parameters influence the planningof disruptive technologies and the creation of new products inthe market place.

VII. H YPOTHESES

The purpose of this study is to examine the behavior of firmsas it relates to the commercialization of sustaining disruptivetechnologies and determining the differences between the twogroups. Responses to the questionnaire provided data for a dis-criminate analysis that sought to find a model that effectivelypredicts these differences. This analysis will help us in focusing

commercialization efforts on certain types of firms for differentareas of technology and different situations. It allows a descrip-tive analysis of the commercialization activities of firms but canlead to a prescriptive set of recommendations that change theway firms examine new technologies. In this study, we have re-spondents from two populations that differ in the character ofthe technologies chosen for commercialization.

To test for differences between the two groups, we tested forseparate hypothesis developed from the literature and boundedby our survey responses. All of the hypotheses utilize productrealization, revenue generation, research support, and marketpotential as variables to one extent or another. We developedthese variables from product realization efforts by Lynn,et al.[20], Veryzer [37], and others. We supported this hypothesisfrom revenue generation input from Kaplan [13], Moore [24],and others. The hypothesis was fortified by market potentialliterature developed by Linton [19], Moore [24], and others.Finally, we developed the research support portion for thishypothesis literature from Kassicieh and Radosevich [14]Tushman,et al. [35], and others.

A. Hypothesis 1

The sustaining technologies group differs from the disruptivetechnology group in the four factors of importance: product real-ization, revenue generation, research support, and market poten-tial. Here, we utilize the literature that categorizes technologyby its commercial intensity such as efforts by Schumpater [33],Anderson and Tushman [2], Walsh and Linton [41], and manyothers in conjunction with the aforementioned literature used to


develop our four factors of product realization, revenue genera-tion, research support, and market potential.

B. Hypothesis 2

The large firms differ from the small firms in the four factorsof importance: product realization, revenue generation, researchsupport, and market potential. The development of this hypoth-esis relies heavily on the small firm literature from authors suchas Kirchhoff [16], Birch [3], Rice,et al. [30], and many othersas well as the aforementioned literature used to develop our fourfactors of product realization, revenue generation, research sup-port, and market potential.

C. Hypothesis 3

Firms with a large internal R&D function (large R&D groupwithin the firm points to an internal source of innovation)differ from firms with a small R&D function (therefore externalsources of innovation) in the four factors of importance: productrealization, revenue generation, research support, and marketpotential. Here again, we utilized the four-factor literaturebase supplementing it with the efforts from Kassicieh andRadosevich [14], Carroad and Carroad [5], and many others.

D. Hypothesis 4

Firms with good financial and market performance over thelast few years (good financial or market performance leads to atendency to take less risk on new disruptive technology) differfrom firms with poor financial and market performance in thefour factors of importance: product realization, revenue gener-ation, research support, and market potential. Here again, wedeveloped much of our hypothesis from the four-factor litera-ture base and Kaplan [13], Kassicieh and Radosevich [14], andmany others.

The responses were also classified according to differentcombinations. The sustaining technologies group (ST) and thedisruptive technologies group (DT) could be further classifiedinto small or large firms (SF or LF), firms with external orinternal sources of innovation (ExI or InI), and firms who haveperformed well or poorly in financial/ market results (GR orPR), and who are apt to take more or less risks, so that we nowhave four groups in each category.

1) Major Hypothesis 1:Large ST firms, Small ST firms,Large DT firms, and Small DT firms differ in the importanceplaced on the four factors (product realization, revenue gen-eration, research support, and market potential) related tocommercialization.

2) Major Hypothesis 2:ST firms with internal sources ofinnovation, ST firms with external sources of innovation, DTfirms with internal sources of innovation, and DT firms withexternal sources of innovation differ in the importance placedon the four factors related to commercialization.

3) Major Hypothesis 3:ST/GR, ST/PR, DT/GR, DT/PRdiffer in the importance placed on the four factors related tocommercialization.

VIII. M ETHODOLOGY

A questionnaire that queried respondents about their com-pany and the importance of several areas in commercializationwas sent to a sample from two populations. Both populationswere firms that have collaborated with Sandia National Labo-ratories (Sandia) on an innovation. The first population workedwith Sandia in the area of MEMS, which is one of the disruptivetechnology areas. The second population worked with Sandiaon other technologies that are sustaining or improving the cur-rent level of technologies used in the firms’ products or services.While different inventions in these two areas represent varyingdegrees of entrepreneurial opportunity, we selected only thosewhere a commercial firm showed a strong interest.

The same survey instrument was used for both groups. Thedisruptive technology commercialization group (DT group)consists of individuals representing organizations that hadparticipated in one of Sandia’s MEMS commercializationactivities. Sandia offers training, design software, training inMEMS manufacturing, and prototyping facilities for use byfirms with an interest in MEMS technology. This group is madeup of 174 participants.

The sustaining technology commercialization group (STgroup) is made up of managers and technologists from firmsthat have worked with Sandia in a variety of joint research anddevelopment agreements but not MEMS. This second group ismade up of 207 individuals.

The surveys were sent to these individuals with e-mail andphone follow-up to increase the response rate. Seventy-two STgroup responses were received (35% response rate) and 59 DTgroup responses (34% response rate). The response rate is sub-stantial given the sensitivity of the information.

The questionnaire consisted of questions about the firm: itssize; the number of locations; its activities in R&D, design, man-ufacturing and sales, and the number of employees in each oneof these areas, and the importance of the two foci parameterslisted earlier. The survey instrument consisted of 54 questionsdesigned to capture data about several variables. Questions werederived from three sources: 1) the authors’ experiences with lab-oratory spin-offs over the last two decades; 2) a pilot study; and3) the literature on commercialization cited above.

The survey allows us to deal with the firms in manydimensions:

a) sustaining or disruptive technologies;b) small and large firms;c) firms with large R&D functions where the source of the

firm’s product and process innovations will be internal asopposed to firms with small or no internal R&D functionthat depend on external sources for innovations in prod-ucts or processes;

d) firms who have performed well in financial returns and/ormarket share versus firms who have not done well in thesedimensions.

These firms were asked about the importance of the followingvariables using a ten-point scale with semantically anchored endpoints:

1) innovation;2) applications;


TABLE IT-TEST OFDIFFERENCESBETWEENFACTOR MEANS FOR THESUSTAINING TECHNOLOGIES ANDDISRUPTIVETECHNOLOGIESGROUPS

3) existing products;4) government buyers;5) commercial buyers;6) distribution channels;7) research support for applications;8) research support for new products;9) market growth potential;

10) acquisition of external innovations;11) investment in research;12) product development for revenue generation;13) process development for revenue generation;14) product families for revenue generation;15) speed and timeliness of new processes;16) speed and timeliness of new products.

Factor analysis was run for these 15 variables using principalcomponents with varimax rotation. These variables were re-duced to four factors with Eigenvalues greater than 1 and thereliability was measured with Cronbach’s alpha.

1) Product Realization: The following variables were in-cluded in this factor: the importance of acquisition of ex-ternal innovations, investment in research, process devel-opment for revenue generation, speed and timeliness ofnew processes, and speed and timeliness of new products.This factor has a reliability of 0.7412.

2) Revenue generation: The following variables were in-cluded in this factor: the importance of buyers, productdevelopment for revenue generation, product families forproduct generation, and new products. This factor has areliability of 0.7640.

3) Research Support: The following variables were in-cluded in this factor: the importance of innovation,government buyers, research support for applications,and research support for new products. This factor has areliability of 0.7113.

4) Market potential : The following variables included inthis factor: the importance of applications, existing prod-ucts, distribution channels, and market growth potential.This factor has a reliability of 0.7089.

To ensure the reliability of the survey instrument, Cronbach’salpha for the 15 variables is 0.7234. Nunally [27] indicates thata reliability measure of 0.70 or higher is acceptable indicatingthe reliability of the survey instrument.

IX. STUDY RESULTS

We conducted statistical tests for the each one of the hy-potheses. In each case, the t-test was conducted to test for dif-ferences between the mean responses for the four factors. Weprovide our four hypotheses and results here.

A. Hypothesis 1

The sustaining technologies group differs from the disruptivetechnologies group in the four factors of importance: productrealization, revenue generation, research support, and marketpotential.

Here our hypothesis that firms focusing on sustaining tech-nologies differ from those that focused on disruptive technolo-gies was supported. Our analysis of the two groups by means ofa t-test highlights the differences between the mean responsesfor the four factors. We provide the t-test analysis in Table I.

B. Hypothesis 2

The large firms differ from the small firms in the four factorsof importance: product realization, revenue generation, researchsupport, and market potential.

Here, our hypothesis that large firms focusing on disruptivetechnologies differ from small firms focusing on disruptive tech-nologies was not supported at least along our four factors. Ouranalysis of the two groups by means of a t-test demonstrates nosignificant differences between the mean responses for the fourfactors. We provide the t-test analysis in Table II.

C. Hypothesis 3

Firms with a large internal R&D function (large R&D groupwithin the firm points to an internal source of innovation) differfrom firms with a small R&D function (therefore, external


TABLE IIT-TEST OFDIFFERENCESBETWEEN FACTOR MEANS FOR THESMALL AND LARGE FIRMS

TABLE IIIT-TEST OFDIFFERENCESBETWEENFACTOR MEANS FOR THEINTERNAL SOURCE OFINNOVATION GROUP AND THEEXTERNAL GROUP OFINNOVATIONS GROUP

sources of innovation) in the four factors of importance: productrealization, revenue generation, research support, and marketpotential.

Here, our hypothesis that firms focusing with large internalR&D functions differ from firms with small R&D functions wasnot supported. Our analysis of the two groups by means of at-test demonstrates no significant differences between the meanresponses for the four factors. We provide the t-test analysis inTable III.

D. Hypothesis 4

Firms with good financial and market performance of thefirm over the last few years (good financial or market perfor-mance leads to a tendency to take less risk on new disruptivetechnology) differ from firms with poor financial or market per-formance in the four factors of importance: product realization,revenue generation, research support, and market potential.

Here, our hypothesis that firms with good financial andmarket performance differ from firms with poor financial ormarket performance was not supported. Our analysis of thetwo groups by means of a t-test demonstrates no significantdifferences between the mean responses for the four factors.We provide the t-test analysis in Table IV.

X. DISCUSSION

We demonstrated in Table I that firms interested in commer-cializing sustaining technologies differ from firms that are in-

terested in commercializing disruptive technologies in three ofthe four factors. The existence of revenues, the availability ofresearch support, and the presence of potential markets were allsignificant factors in their decisions to pursue technology devel-opment and commercialization. Sustaining technologies firmsplaced more importance on new products and markets than dis-ruptive technologies firms. Disruptive technologies firms placedmore importance on research support. These results are intu-itively appealing and follow the logic that has been advancedby many authors previously.

We could not find significant differences between large andsmall firms as portrayed in Table II. The fact that no significantdifferences are indicated is counterintuitive given to much ofthe commercialization literature which has stressed the impor-tance of small entrepreneurial firms in the innovation process.This result might indicate that large firms have realized that theyneed to examine new disruptive technologies and commercializethem when the opportunities are available. Another possible ex-planation is that the small firms in our study differ significantlyfrom many other small firms (i.e., they have more money thanmany small firms and act like large firms). Another plausibleexplanation is that large firms realize the importance of dis-ruptive technologies and indicate its importance but usually donot proceed to commercialize the technologies due to many in-ternal structural issues present in those firms. Another explana-tion might be that large and small firms do differ but not alongthe factors we have proposed. Finally, it is hard to discern if the


TABLE IVT-TEST OFDIFFERENCESBETWEENFACTOR MEANS FOR THEFINANCIALLY WELL-PERFORMINGFIRMS GROUP AND THEFINANCIALLY POOR-PERFORMINGGROUP

TABLE VFACTORSANOVA AND FACTOR MEANS AND STANDARD DEVIATIONS FOR TECHNOLOGY TYPE AND FIRM SIZE

large firms are gate keeping these technologies or actually com-mercializing them. Nevertheless, this is a very interesting resultthat might indicate that a change has resulted from all of the lit-erature that prescribes the “ambidextrous” organization.

We could not find significant differences between firms thathave large internal R&D functions and firms that depend onexternal sources as portrayed in Table III. This indicates thatfirms may have been diligent in pursuing new technologiesin both sustaining and disruptive areas whether they haveemanated from within the organization or from outside sources.Another plausible explanation is that many firms realize theimportance of disruptive technologies and indicate that manytimes they are found exogenous to the firm as indicated inmuch of the management literature.

We could not find significant differences suggesting that well-performing firms (financially and/or in market share) have beenplacing more importance on the innovation process and on newproducts than firms that have not done well financially as por-trayed in Table IV. This is again counterintuitive on two frontsbecause it has been argued previously that firms that are notdoing well financially will take more risks or that well-per-forming firms have inherently better innovation processes.

We further examine and discuss different aspects of firmsinterest in disruptive technologies through further sets ofhypotheses focusing on separating our groups according tosize, sources of innovation, and financial performance but alsoclassifying them as disruptive technology firms or sustainingtechnology forms to further understand the differences betweenthese two types of firms.

Table V shows the ANOVA test (Neteret al., [26]) was run totest for differences among the four groups of firms:

1) small firms interested in sustaining technologies;2) large firms interested in sustaining technologies;3) small firms interested in disruptive technologies;4) large firms interested in disruptive technologies.

Significant differences were found in two factors: revenue gen-eration and market potential. This result supports the resultsshown in Table I with the same interpretation.

Table VI examines the differences between each one of thefour groups. Significant differences at the 5% and 10% levelexisted among many of the groups.

1) Small and large sustaining technologies firms behavedsimilarly.


TABLE VIFACTOR HYPOTHESESTESTING

TABLE VIIFACTORSANOVA AND FACTOR MEANS AND STANDARD DEVIATIONS FORTECHNOLOGYTYPE AND INTERNAL/EXTERNAL SOURCE OFINNOVATION

2) Small firms in sustaining and disruptive technologiesdiffered on the importance of the existence of potentialmarkets. Disruptive technologies firms usually know thatthe markets have to be created from their work and thatthey do not exist prior to that work.

3) Small sustaining technologies firms and large disruptivetechnologies firms seem to be similar.

4) Small firms in disruptive technologies differed signifi-cantly from large sustaining technologies firms as to theimportance of potential markets. The same analysis as inii) above.

5) Large sustaining technologies firms differed from largedisruptive technologies firms in placing importance onrevenue generation and potential markets.

6) Large and small disruptive firms acted similarly.

Table VII indicates the differences among four groups:

1) firms that depend on external sources of innovation andthat are interested in sustaining technologies;

2) firms that depend on internal sources of innovation andare interested in sustaining technologies;

3) firms that depend on external sources of innovation andthat are interested in disruptive technologies;

4) firms that depend on internal sources of innovation andare interested in disruptive technologies.

Significant differences were found in two factors: revenue gen-eration and existence of potential markets. The ANOVA F-teststatistic indicates significant differences that could be explainedby the sustaining disruptive technologies differences seen in theearlier tests.

Table VIII indicates significant differences among sustainingand disruptive technologies firms that depend on externalsources of innovation in the revenue generation and marketfactors. Disruptive technologies firms seem to be less focusedon the revenue generation or potential markets in disruptivetechnologies and are probably more interested in the technologyitself so that they can create their own markets. Similarly differ-ences exist between sustaining technologies firms with internalsources of innovation and disruptive technologies firms withexternal sources of innovation. The same logic applies here asin the earlier case.

Table IX looks at the differences among four groups definedby sustaining or disruptive technologies and poor or good fi-nancial and market performance in the last three years. Thefour groups are: 1) firms that have poor financial performanceand that are interested in sustaining technologies; 2) firms thathave good financial performance and are interested in sustainingtechnologies; 3) firms that have poor financial performance andthat are interested in disruptive technologies; and 4) firms thathave good financial performance and are interested in disrup-


TABLE VIIIFACTOR HYPOTHESESTESTING

TABLE IXFACTORSANOVA AND FACTOR MEANS AND STANDARD DEVIATIONS FOR TECHNOLOGY TYPE AND FINANCIAL PERFORMANCE

tive technologies. Significant differences exist in three of thefour factors. The factors indicating product realization, revenuegeneration, and potential markets show significant differencesamong the four groups.

Table X shows significant differences between sustainingtechnologies firms and disruptive technologies firms that havepoor financial performance. The differences are in the potentialmarket and revenue generation factors indicating that disruptivefirms do not seem to attach importance to these areas in theirdecision to pursue these technologies. The same differences arealso apparent between sustaining technologies firms with goodfinancial performance and disruptive technologies firms withpoor financial performance. These firms also show a significantdifference in the product realization area. Another differenceexists between disruptive technologies firms with good andpoor financial performance records in the revenue generationarea with good performing companies putting more importanceon the revenue factor.

A. Conclusions and Implications for Management

Our study suggests that firms that pursue the commercializa-tion of disruptive technologies place different importance onthe product realization and on research support for the tech-

nologies than sustaining technologies firms that seem to be fo-cused on revenue generation and market potential. The size ofthe firms did not seem to make much difference but this maybe a problem with the firms in our sample other factors suchas financial performance in the last three years seem to be afactor. Classification of firms by more than one characteristic(type of technology plus size, source of innovation, and finan-cial performance) helped clarify some of these conclusions. Themajor conclusion of this paper are that: 1) Firms do utilize dif-fering techniques to pursue disruptive technologies. 2) Firmsthat pursue disruptive technologies have a difficulty taking amarket focused approach and must be much more creative intheir approach to the market irrespective of the source of innova-tion, size or financial performance. 3) Sustaining technologiesfirms focus on existing markets and their ability to introducenew products that is traditionally their strong suit.

Firms working with sustaining technologies focused on rev-enue generation and their cash flow potential whereas firmsworking with disruptive technologies seem to understand theneed to develop the supporting infrastructure to realize newproducts. It seems that firms dealing with disruptive technologyknew that they have a longer road to profitability but that itmight be worth it from a risk/reward relationship. Small andlarge firms reacted the same way to all issues indicating that


TABLE XFACTOR HYPOTHESESTESTING

learning has occurred in large firms requiring them to act and be-have as small firms when it comes to working with technology.This might also be the Sandia effect in the sense that firms thatwork with Sandia anticipate major breakthroughs that will re-quire a longer (but more profitable) path to commercializationin sustaining and disruptive technologies. The source of the in-novation did not have an effect on behavior of firms but past fi-nancial performance seems to propel the groups that have donewell to try to keep their advantage by working hard at gettingnew products to market, whereas low profitability seems to in-dicate that it is a result of and a cause for the inability to getthings done.

Differences were obvious between firms engaged in commer-cialization of disruptive technologies irrespective of their sizeand large firms focused on sustaining technologies. These dif-ferences indicate that firms interested in sustaining technolo-gies wanted more buyers and revenue generation and dependedless on government buyers and research support. Firms workingon sustaining technologies wanted more distribution channelsand market growth. Firms trying to commercialize disruptivetechnologies using external innovations were less interested inbuyers and market growth. The bottom line seems to indicatethat firms commercializing disruptive technologies know thatmarkets are somewhat farther than existing products improvedwith sustaining technologies, but firms were willing to use ex-ternal support from external research sources to further buildtheir capabilities in disruptive technologies hoping for a majorshift to their products in the near future, bringing with it newmarkets and new customers.

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Suleiman K. Kassicieh (M’88) is the Regents’Professor of Management of Technology and AlbertFranklin Black Professor of Entrepreneurship, andChairman of the Department of Finance, Interna-tional and Technology Management at the AndersonSchool of Management at the University of NewMexico. He has consulted with a number of nationaland international organizations such as Los Alamosand Sandia National Laboratories in a numberof areas such as strategic planning, informationtechnology, and technology commercialization. He

has also consulted on business development with a large number of high-techstartups. He teaches in the areas of technology commercialization, technologyassessment, and equity/venture capital. He has over 100 published technicaland management papers and is author of the bookFrom Lab to Market:Commercialization of Public Sector Technologies(New York: Plenum, 1994).

Steven T. Walsh (S’94–M’95) received the B.S.degree in biomedical engineering and the Ph.D.degree in strategy with specialization in manage-ment of technology and entrepreneurship fromRensselaer Polytechnic Institute, Troy, NY. He alsoholds a certificate of Advanced Studies in businessadministration from Northeastern University and anMBA in marketing and new product planning.

Dr. Walsh is the Director of TechnologicalEntrepreneurship at the University of New Mexicowhere he has been awarded the Black Professorship

of Entrepreneurship. He has been a director of a Fortune 500 company divisionand president of entrepreneurial firms. He has published well over 100 pub-lished articles serving both the academic and practitioner communities. He hasbeen a plenary or invited speaker numerous at many universities and nationallaboratories in the United States and on four other continents. Further, he hasserved as a plenary speaker for many academic and industrial organizationssuch as the International Association of Management of Technology (IAMOT),SPIE (The International Society for Optical Engineering), MANCEF (theMicro and Nano technological Commercialization Education Foundation),SEMI (Semiconductor Equipment and Materials International), and IAPD(International Association of Product Development Professionals). He is theFounding President for the MANCEF.

Dr. Walsh is a member of the board of reviewers for the IEEE TRANSACTIONS

ON ENGINEERING MANAGEMENT, an Associate Editor for Microsystems Com-mercialization and Silicon processing for theSPIE Journal of Microlithography,Microfabrication, and Microsystems, an Area Editor for theEngineering Man-agement Journal, and a Special Issue Editor for IEEE TRANSACTIONS ON

ENGINEERING MANAGEMENT and other journals. He is Co-chair for theinternational technology roadmap for Micro and Top Down Nano Systems, aBoard Member of the MESA Institute at Sandia National Laboratories, and aMember of the Board of advisors of R&D magazine’sMicro Machine Devicesmagazine.

John C. Cummings received the B.S., M.S. and Ph.D. (1973) degrees fromCalifornia Institute of Technology, Pasadena. His Ph.D. research involved thedevelopment of a cryogenic shock tube and the study of strong shock waves ingaseous and liquid helium.

He is currently on temporary assignment as a Technical Advisor to the WhiteHouse Homeland Security Transition Planning Office (planning for the new De-partment of Homeland Security). Before his current position, he was the Deputyto the Chief Technology Officer and Manager of the Science and TechnologyStrategic Management Unit Office at Sandia National Laboratories in Albu-querque, NM. He has worked at Sandia for 26 years serving in a wide varietyof technical staff and management positions. His technical work includes re-search in experimental fluid mechanics, combustion, and the use of laser-basedinstrumentation. Before joining Sandia, he was employed by the EngineeringSciences Department at TRW Systems, Inc., where he conducted studies of HFand DF chemical lasers. He is the author or coauthor of over 50 technical pub-lications and reports.

Dr. Cummings is a member of the American Physical Society Division ofFluid Dynamics, and he served as the U.S. representative to the InternationalAtomic Energy Agency working on the mitigation of hydrogen combustion haz-ards in nuclear power plants.

Paul J. McWhorter is one of the pioneering researchers in the field of micro-electro mechanical systems (MEMS). In 1992, he initiated Sandia’s MEMS Pro-gram and grew the program to one of the largest in the country. In Octoberof 2000, he left Sandia to form MEMX, a start-up company focused on rev-olutionary telecommunications products based on MEMS and he is presentlyserving as CTO.

Dr. McWhorter’s work has been recognized with five IEEE best paper awards,two R&D 100 awards, Industry Week’s “Top Technology of the Year” Award,and Science News’ Top Development of the Year Award. He was named 1998New Mexico Inventor of the year and Sandia’s Outstanding Corporate Inventor.He has been featured on the ABC evening news with Peter Jennings, CNN, andin publications including Forbes, Fortune, and Business Week.


Alton D. Romig received the B.S., M.S. and Ph.D. degrees in materials scienceand engineering from Lehigh University in 1975, 1977, and 1979, respectively.

In 1979, he joined Sandia National Laboratories as a member of the tech-nical staff, Physical Metallurgy Division. After a variety of management as-signments, he was named Director, Materials and Process Sciences in 1992.In 1995, he was named Director, Microelectronics and Photonics, and in 1998Director of Microsystems Science, Technology and Components. He served inthis capacity until attaining his present position in 1999. He is currently VicePresident, Science and Technology and Partnerships and Chief Technology Of-ficer at Sandia National Laboratories, Albuquerque N.M. He is Chief ScientificOfficer for the Nuclear Weapons program. He is also accountable for Sandia’sinteractions with industry and the Laboratories’ Campus Executive program.In addition, he is responsible for the Laboratory Directed Research & Devel-opment program (DOE’s IR&D). He has approximately 160 technical publica-tions, is the co-author of three textbooks, and holds two patents. He also serveson the Boards of Technology Ventures Corporation, a Lockheed Martin sub-sidiary dedicated to technology commercialization, and the National Coalitionfor Advanced Manufacturing (NACFAM).

Dr. Romig has received several awards, including the Burton Medal (1988),awarded by the Electron Microscopy Society of America to an OutstandingYoung Scientist; the K.F.J. Heinrich Award (1991), given by the MicrobeamAnalysis Society to an Outstanding Young Scientist; the ASM Silver Medalfor Outstanding Materials Research (1992); and the Acta Metallurgica Interna-tional Lectureship (1993–1994). He is a Past-President of ASM, International(formerly American Society for Metals). He is currently the Chair of the ASMEducational Foundation. Other current professional activities include servingon, and chairing, a number of committees for ASM International, The Min-erals, Metals and Materials Society, the Materials Research Society and theMicrobeam Analysis Society (MAS). He is active on a number of NationalAcademy of Engineering/National Research Council Committees and Boards.

W. David Williams received the A.B. degree from University of California,Irvine, in 1972, and the Ph.D. degree in physics from Cornell University, in1976.

He heads the first satellite office of Ardesta, located in Albuquerque,NM, which opened in August 2001. He serves as Vice President and CEOof Ardesta’s Southwest Office. Before joining Ardesta, he was the Directorof Microsystems Science, Technology and Components Center at SandiaNational Laboratories. While there, he directed the research, development andengineering of microelectronic, photonic, and microelectromechanical devicesand systems. He was responsible for the operation of two fabrication facilities.

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