EVALUATING THE ANTECEDENTS OF FOUNDATIONAL INNOVATIONS: A LONGITUDINAL LOOK AT PATENTS FROM INFORMATION TECHNOLOGY INDUSTRY

Past research has shown that foundational innovations is often contingent upon access to technologies whose influence/application exceeds the territory of that technology’s definition (technology-application diversity) and sourcing innovation outside a firm’s focal industry (sourcing diversity). However, going outside one’s focal industry can be expensive, complicated, and distracting, possibly leading to mixed results. We theorise that while technology-application diversity enhances foundational innovations, sourcing diversity impedes it. In addition, we argue that sourcing diversity negatively moderates the relationship between technology-application diversity and foundational innovation. Finally, we argue that high technology-application diversity and low sourcing diversity will have the strongest relationship with foundational innovation. To test our assertions, we studied patent filings between 1996 and 2009 from the IT industry from the S&P 500 database. The empirical evidence supported our claims. Findings recommend that to maximise chances of foundational innovation, firms must combine high instances of technologies whose application transcend their definitions with the minimum possible contacts outside their focal industry. Thus, there is an optimum combination of sourcing diversity and technology-application diversity with which foundational innovation is maximised. We close the paper by summarising the key conclusions, conferring implications for theory and practice, and proposing avenues for future research.