Alliances, External Technology Acquisition, and Discontinuous Technological Change

Abstract

A new paradigm, a radical innovation, the next killer application–the terms differ, but they all point to the same thing: a major change in the technology base for a mature industry. A discontinuous technological change (DTC) poses a significant challenge for the companies operating in the affected industry. The technology at the foundation of their products and markets has changed, and they must find a way to adapt to that change. To maintain their competitive standing, they must master the new technology and ensure that their products and processes fully exploit it. Noting that alliances offer an increasingly popular means for meeting the challenges that a DTC presents, C. Jay Lambe and Robert E. Spekman explore two issues related to alliances and DTC. First, why does DTC motivate companies to use alliances as a means for acquiring technology? And second, how do these motivations change during the various stages of the DTC life-cycle? By understanding the relationship between DTC and technology sourcing alliances, a firm can increase the likelihood of success for its alliances and thus improve the effectiveness of its product development efforts. When faced with a DTC, an established firm has three options for obtaining the new technology: merging with or acquiring a company that already possesses the technology; developing the required capabilities by using existing resources; or entering into some form of alliance. Because of time-to-market pressures and industry uncertainty, alliances often take precedence over the other two options for acquiring the new technology. However, the attractiveness of alliances also varies as a result of changes in the levels of urgency and uncertainty throughout the DTC life-cycle. The advent of a radical innovation is marked by a relatively low sense of urgency and high levels of industry uncertainty. Firms are not yet certain how the new technology will affect the industry, and they may not feel compelled to enter into technology sourcing alliances. As the new technology takes hold–and the levels of urgency and uncertainty peak–the motivation for entering into a technology sourcing alliance also reaches its highest level. Firms must move quickly to secure a position of market leadership, and the right alliance can jump-start those efforts. During the latter stages in the DTC life-cycle, the technology and the market requirements become more stable, the levels of urgency and industry uncertainty decrease, and firms often shift their focus from alliances to internal development and acquisitions.