Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms

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Architecturai Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms Rebecca M. Henderson Massachusetts Institute of Technology

Kim B. Clark
Harvard University

This paper demonstrates that the traditional categorization of innovation as either incremental or radical is incomplete and potentially misleading and does not account for the sometimes disastrous effects on industry incumbents of seemingly minor improvements in technological products. We examine such innovations more closely and, distinguishing between the components of a product and the ways they are integrated into the system that is the product "architecture," define them as innovations that change the architecture of a product without changing its components. We show that architectural innovations destroy the usefulness of the architectural knowledge of established firms, and that since architectural knowledge tends to become embedded in the structure and information-processing procedures of established organizations, this destruction is difficult for firms to recognize and hard to correct. Architectural innovation therefore presents established organizations with subtle challenges that may have significant competitive implications. We illustrate the concept's explanatory force through an empirical study of the semiconductor photolithographic alignment equipment industry, which has experienced a number of architectural innovations.*

© 1990 by Cornell University. 0001-8392/90/3501-0009/$1,00.

The distinction between refining and improving an existing design and introducing a new concept that departs in a significant way from past practice is one of the centra! notions in the existing literature on technical innovation (Mansfield, 1968; Moch and Morse, 1977; Freeman, 1982). Incremental innovation introduces relatively minor changes to the existing product, exploits the potential of the established design, and often reinforces the dominance of established firms {Nelson and Winter, 1982; Ettlie, Bridges, and O'Keefe, 1984; Dewar and Dutton, 1986; Tushman and Anderson, 1986). Although it draws from no dramatically new science, it often calls for considerable skill and ingenuity and, over time, has very significant economic consequences (Hollander, 1965). Radical innovation, in contrast, is based on a different set of engineering and scientific principles and often opens up whole new markets and potential applications (Dess and Beard, 1984; Ettlie, Bridges, and O'Keefe, 1984; Dewar and Dutton, 1986). Radical innovation often creates great difficulties for established firms (Cooper and Schendet, 1976; Daft. 1982; Rothweli, 1986; Tushman and Anderson, 1986) and can be the basis for the successful entry of new firms or even the redefinition of an industry. Radical and incremental innovations have such different competitive consequences because they require quite different organizational capabilities. Organizational capabilities are difficult to create and costly to adjust (Nelson and Winter, 1982; Hannan and Freeman, 1984). incremental innovation reinforces the capabilities of established organizations, while radical innovation forces them to ask a new set of questions, to draw on new technical and commercial skills, and to employ new problem-solving approaches (Bums and Stalker, 1966; Hage, 1980; Ettlie, Bridges, and O'Keefe, 1984; Tushman and Anderson, 1986). 9/Administrative Science Quarterly, 35 (1990): 9-

This research was supported by the Division of Research. Harvard Business School. Their support is gratefully acknowledged. We would like to thank Dataquest and VLSI Research Inc for generous permisston to use their published data, the staffs at Canon, GCA, Nikon, Perkin Elmer and Ultratech. and ail those individuals involved with photolithograr^ic alignment technology who gave so generously of their time. We woukj also like to thank the editors of this joumal and Hiree anonymous reviewers who gave us...
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