Reduced Incentive to Invest


The fear of the loss of revenues can reduce a firm’s incentive to invest in a drastic (radical in the economic sense) innovation. If a firm holds a near monopoly position in a market, and knows that by investing in a drastic innovation it will accelerate the introduction time of the innovation, it may not want to invest, all else being equal. The incentive changes if the firm knows that by not investing in the innovation, someone else would. For example, Intel’s Pentium was a drastic innovation since it rendered the 486, for the most part, noncompetitive. If Intel had not introduced the Pentium, there is a good chance that its competitors would have introduced a comparable product.

 My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Fear of Loss of Revenues


If a firm’s innovation renders its existing products or services noncompetitive, the firm loses the revenues from the old product. Since a firm’s stock value usually depends on expected earnings, such a loss in revenues and accompanying profits may result in a drop in a firm’s value. The fear of such a loss may result in the firm being reluctant to adopt the invading innovation. Such a loss in  revenues can also have organizational consequences. If the source of power for the most powerful in the firm is the revenues from the old product, the political coalition may impede implementation.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact Asif J. Mir.