Effects of Search Timing on Innovation: The Value of Not Being in Sync with Rivals

This paper investigates the effects on product innovation of firms' search to innovate, taking into account how a firm's search relates to that of its competitors. Drawing on organizational learning theory, we hypothesize that search timing relative to competitors matters and test two seemingly contradictory views: that competitors take away the exclusivity of search and therefore suppress innovation or, in contrast, sharpen and validate the focal firm's search and thus promote innovation. Our analysis of 15 years of longitudinal data on 124 Japanese, European, and U.S. industrial automation organizations reconciles these views. Results show that firms introduce more new products if they search after their competitors do, and they introduce more innovative new products if they search ahead of their competitors. The most innovative firms combine these two approaches, bridging their own and their rivals' hitherto isolated clusters of knowledge, but avoid engaging in learning contests in which they search at the same time as their rivals. The key insight for innovating firms, then, is not necessarily to strive to perform as well as possible in absolute terms, but to be different from the competition.