often miss disruptive innovations is potentiallymisleading—particularly as it has been interpretedin the popular press. I suggest that organizationalcompetence, in the traditional sense of the embeddedorganizational routines of established companies, maybe much more central to established ﬁrm failure inthe face of disruptive innovation than is generallyacknowledged. Christensen himself offers tantaliz-ing hints of this possibility throughout his publishedwork, and I argue that expanding on these hintsto acknowledge the depth and complexity of the roleplayed by embedded organizational competence iscritically important in understanding why respond-ing to disruptive innovation is so difﬁcult for estab-lished ﬁrms.The article begins by tackling the important ques-tion of whether it is rational, from the perspective of the shareholders, for established ﬁrms to respond todisruptive innovation. Although popular interpreta-tions of Christensen’s work assume that establishedﬁrms not introducing disruptive innovation are fail-ures, I argue that as Christensen himself acknowl-edges this is not an easy question. Indeed if estab-lished competencies in production and marketing arenot only difﬁcult to change but also, by their verypresence, are barriers to the development of new,more appropriate competencies, then deciding not torespond to disruptive innovation may be a completelyrational choice.I then turn to a discussion of the circumstances inwhich a response to disruptive innovation would havebeen, ex post, a rational decision and explore why es-tablished ﬁrms ﬁnd it so difﬁcult to respond appro-priately even in this subset of cases. I build on thework of Ron Adner, who in a sequence of carefulpapers has shown how changes in the structure of consumer demand—in combination with technicalprogress—almost certainly lie behind the phenome-non of disruption (e.g., Adner, 2002; Adner andZemsky, 2005). I argue that the established routinesof large incumbent ﬁrms make it particularly difﬁcultfor them ﬁrst to sense and then to act on preciselythese kinds of shifts, so that the decision-making dy-namics highlighted by Christensen may be as much aproduct of failures in what one might call
—or of what Danneels (2002, 2004)calls
—as they are of resourcedependence. The article concludes with a brief discus-sion of the implications of this hypothesis for futureresearch and for our understanding of the dynamicsof technical and competitive change.
Is It Rational to Respond toDisruptive Innovation?
Are established ﬁrms irrational in failing to respondto disruptive innovation? Christensen’s work can,I think, be read both ways on this point, but it is acentral question that deserves clariﬁcation. My read-ing of the
, and certainly popularinterpretations of the work, seems to suggest that sen-ior teams failing to invest in disruptive innovationsare irrational—that they should have made the ap-propriate investments but were unsuccessful in doingso because they were blinded by current customersand larger margins. However, in the
this stance has shifted: the book can be read assuggesting that established managers who do not re-spond to disruptive innovation are, in fact, acting intheir ﬁrm’s best interest.
The asymmetries of motivation chronicled in this chap-ter are natural economic forces that act on all business people, all the time. Historically, these forces almostalways have toppled the industry leaders . . . becausedisruptive strategies are predicated upon competitorsdoing with is in their best and most urgent interest:satisfying their most important customers and investingwhere profits are most attractive (Christensen and Raynor, 2003, p. 55).
The neoclassical literature has identiﬁed a number of cases under which established ﬁrms might rationallychoose not to invest in innovation threatening to dis-place them (e.g., the survey of the issue in Henderson,1993), and it seems plausible that at least some dis-ruptive innovations meet these criteria. If, for example,an investment by the incumbent ﬁrm will significantlyaccelerate the date at which a replacement technologywill be introduced, then under some circumstances itmay be rational for an established ﬁrm to delay its owninvestment until it can be certain the new technologywill be introduced by another ﬁrm. But this does notseem to be the reasoning for the majority of disruptiveinnovations identiﬁed in the literature.When there is no danger of self-induced canniba-lization, the neoclassical literature would suggest thatif it is rational for an entrant to invest in a particulartechnology it should also be rational for an incumbentto invest in the same opportunity. Intuitively, if anopportunity yields a return at greater than the prev-alent cost of capital, then it should be attractive to allpotential investors—including incumbents—and theonly (rational) reason an incumbent might choose not
6 J PROD INNOV MANAG2006;23:5–11R. HENDERSON