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The Incumbent’s Advantage

Title Author(s) Type Topic(s) Comments Date
The Incumbent's AdvantageIansiti, Marco
McFarlan, Warren
Westerman, George
Working Paper02003-04-01
Abstract: One of the most important decisions in responding to a technological or strategic innovation is choosing how to organize the new venture. Separating the new venture from the old organization reduces conflict and enables the new venture to generate speed and focus. On the other hand, keeping it integrated allows the venture to leverage valuable resources and skills from the existing organization. In this paper, we examine the advantages and disadvantages of different approaches to organizing the new venture, both early and late in the innovation's life cycle. We find there are three viable approaches to organizing. Of these three, the choice of using separated or integrated approaches to launch the innovation depends on each firm's unique capabilities and competitive situation. However, all three viable approaches are characterized by integration later in the life cycle. This integration is truly the incumbent's advantage: linking the people, processes, infrastructures and resources of the new and old to create powerful competitive synergies. We describe the three viable approaches and illustrate with examples of how firms used each effectively.

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