Sustaining Breakthrough Innovation in Large Established Firms: Learning Traps and Counteracting Strategies

In this essay we provide a review of the main obstacles that encumber large firms’ attempts to generate breakthrough innovations and, drawing on theoretical insights and case evidence, we also suggest mechanisms through which large firms may cope with these hurdles. We believe that addressing such issues is important for several reasons. First, breakthroughs are related to the creation of private wealth and the generation of streams of Schumpeterian rents for their inventors, while also enhancing social welfare (Trajtenberg, 1990). Identifying strategies that can help such corporations to improve their record of breakthrough innovations can potentially create significant private and social value (Ahuja and Lampert, 2001). Second, a better understanding of the drivers of breakthrough innovations has great strategic importance as superior performance often depends on being consistently innovative (Nelson, 1991). Understanding how incumbents nurture and sustain their innovative preeminence in an industry is therefore a crucial step in the direction of explaining durable sources of superior performance and reducing competitive threats from new entrants.