Rebecca Henderson

• Harvard University

What are the origins of competitive advantage? Although this question is fundamental to strategy research, it is one to which we lack a clear answer. As strategy researchers we believe that some firms consistently outperform others, and we have some evidence consistent with this belief. We also have a number of well‐developed theories as to why, at...

General Motors was once regarded as the best-managed and most successful firm in the world. However, between 1980 and 2009 GM's US market share fell from 46 to 20 percent, and in 2009 the firm went bankrupt. (Figure 1 shows the changing market shares of GM and its main competitors over time.) We argue that the conventional explanation for this decl...

In a capitalist system based on free markets, do managers have responsibilities to the system itself, and, in particular, should these responsibilities shape their behavior when they are attempting to structure those institutions of capitalism that are determined through a political process? A prevailing view — perhaps most eloquently argued by Mil...

The last thirty years have seen the widespread embrace of market capitalism as not only a highly efficient form of economic organization but also as one that best meets the diversity of human preferences. In large, complex societies, an increasing body of theoretical and empirical research suggests, however, that the existence of competitive market...

Unilever's Lipton Tea had been successful with the first phase of its certification partnership with Rainforest Alliance. Now the company faced challenges in how to push forward with the transformation of more difficult parts of the supply chain and how to market sustainable tea in developing markets like India.Learning Objective: This case explore...

and suggestions. I am especially grateful to Adam Jaffe and Joshua Lerner for detailed feedback on an earlier draft. I also wish to thank a number of academic scientists and industrial R&D managers for providing me with their insights into the process by which knowledge flows from academia to industry. I am indebted to Masami Imai, Hiau-Looi Kee, a...

In 1997 Nestle committed to a strategic vision of becoming the leading nutrition, health and wellness (NHW) company in the world. Over the next 13 years, the NHW strategy guided strategic decisions and choices at Nestle including merger and acquisition choices, strategies for improving products, and packaging innovations that helped Nestle built cr...

Since its 1999 merger Reckitt Benckiser (RB), a global consumer goods company, led by its CEO Bart Becht, RB developed a reputation for rapid product innovation and industry leading profit margins. RB's stated strategy was to focus on its Powerbrands and high growth categories and to nurture the Powerbrands with innovation and roll them out globall...

In 2011, Colgate-Palmolive (Colgate) was the global leader in oral care, with a dominant market share lead in toothpaste and a growing presence in toothbrushes and mouthwash. However, the firm faced stiff competition with perennial rivals P&G increasing their focus on the oral care and emerging markets where Colgate had traditionally been untouchab...

Worldwide, and in the U.S. marketplace in particular, the French cachet of L'Oreal was one of its most powerful marketing tools. However, with the opening up of emerging markets, L'Oreal had to cater to a diverse customer base: an aging population in the West, ethnic groups, aspiring and younger customers in the East, emerging markets, and growing...

P&G had become known and recognized as a marketing machine. It was the largest advertiser in the world, with 2010 spending of $8.68 billion. From the company's early exploitation of broadcast media (radio and television) for its soap products to more recent experiments in digital media for its men's hygiene brand Old Spice, P&G was a seasoned marke...

A large literature identifies unique organizational capabilities as a potent source of competitive advantage, yet our knowledge of why capabilities fail to diffuse more rapidly — particularly in situations in which competitors apparently have strong incentives to adopt them and a well developed understanding of how they work — remains incomplete. I...

In November 2010, WikiLeaks began releasing the first of hundreds of thousands of U.S. diplomatic cables that it had obtained. Among the thousands of cables published by early 2011, were several that shed light on Royal Dutch Shell's operations in Nigeria and its relationship with the Nigerian government.Learning Objective: To offer insight into Ro...

We address a longstanding question about the causes of creative destruction. Dominant incumbent firms, long successful in an existing technology, are often much less successful in new technological eras. This is puzzling, since a cursory analysis would suggest that incumbent firms have the potential to take advantage of economies of scope across ne...

Reorienting current energy systems toward a far greater reliance on technologies with low or no carbon dioxide emissions is an immense challenge. This book explores how the U.S. energy innovation system could be improved using a complementary approach. Instead of focusing on the history of the energy industry to draw lessons for the future of energ...

Re-orienting current energy systems toward a far greater reliance on technologies with low or no carbon dioxide emissions is an immense challenge. At the broadest level the histories presented here are very much consistent with widely held views within the energy innovation policy literature. In general, this literature has suggested that greatly i...

Much recent work in strategy and popular discussion suggests that an excessive focus on “managing the numbers” – delivering quarterly earnings at the expense of longer term investments – makes it difficult for firms to make the investments necessary to build competitive advantage. “Short termism” has been blamed for everything from the decline of t...

AS HENDERSON DEFINES it, architectural knowledge is the critical ability to integrate information from various sources during the product development process. In this context, if an organization allows architectural knowledge to become one unarticulated aspect of its culture, innovation suffers as traditions stifle new insights. Alternatively, if a...

The development of the smart grid -- the integration of traditional elements of energy transmission and delivery with information technology -- heralds a new era in the power industry. Many new business opportunities will be created as the smart grid gets developed. What strategies should Cisco employ to become a leader in this industry? What obsta...

In this paper we explore the degree to which patents are representative of the magnitude, direction, and impact of the knowledge spilling out of the university by focusing on the Massachusetts Institute of Technology (MIT), and in particular, on the Departments of Mechanical and Electrical Engineering. Drawing on both qualitative and quantitative d...

Several authors have suggested that a focus on manufacturing capability and on continued process improvement may be a powerful source of competitive advantage, yet many firms appear to have encountered great difficulties in taking advantage of this insight. This paper reports on the results of five these conducted under the auspices of the MIT Lead...

Organizations and Implementation Organizational Competence as a Source of Strategic Advantage Trade-Offs and Organizational Competence Strategic Implications

Prior research on competitive strategy in the presence of increasing returns suggests that early entrants can achieve sustained competitive advantage by pursuing Get Big Fast (GBF) strategies: rapidly expanding capacity and cutting prices to gain market share advantage and exploit positive feedbacks faster than their rivals. Yet a growing literatur...

This paper examines the role of guanxi in the emergence of the Chinese institutional environment, institutional structure and business environment. In China, the institutional environment, institutional structure and resulting business environment are rapidly evolving and are not yet stable or predictable. Under these circumstances, guanxi is impor...

The role of embedded organizational competences in shaping the innovator's dilemma, which was presented in the 'The Innovator's Dilemma' published by Clayton Christensen, is discussed. The book suggests that it is irrational for the senior teams failing to invest in disruptive innovations. The author suggests that the incumbent firms failed to inve...

According to the advocates of a "Generalized Darwinism" (GD), the three core Darwinian principles of variation, selection and retention (or inheritance) can be used as a general framework for the development of theories explaining evolutionary processes in the socio­economic domain. Even though these are originally biological terms, GD argues that...

While there is widespread agreement among economists and management scholars that knowledge spillovers exist and have important economic consequences, researchers know substantially less about the "micro mechanisms" of spillovers — about the degree to which they are geographically localized, for example, or about the degree to which spillovers from...

Do firms build new capabilities by hiring new people? We explore this question in the context of the pharmaceutical industry’s movement towards science-driven drug discovery. We focus particularly on the potential problem of endogeneity in interpreting correlation between hiring and changes in organizational outcomes as evidence of the impact of ne...

Despite an increasing emphasis on the role of senior management cognition in shaping organizational action, there have been few attempts to link top management mental models to strategic choice in the face of discontinuous innovation. This paper uses 23 years of data covering 15 major pharmaceutical firms to explore the degree to which each firm's...

In this book, the editors and a team of distinguished international contributors analyse the nature of organizational capabilities, studying how organizations do things, use their knowledge base, and diffuse that knowledge in competitive environment. Offering both theoretical analysis and detailed evidence from a variety of individual firms and sec...

Drug development performance is examined using data on clinical research projects of 10 pharmaceutical companies. In contrast to previous work on the discovery phase of pharmaceutical R&D we find a strong correlation between the diversity of firms' development efforts and the success probability of individual projects, but no effect of scale per se...

This paper begins to reconcile competing perspectives on the origins of competitive advantage by examining the adoption of ‘science‐driven’ drug discovery, a performance‐enhancing organizational practice. Science‐driven drug discovery diffused slowly, allowing us to disentangle alternative theories of organizational heterogeneity. Adoption is drive...

What are the origins of competitive advantage? Although this question is fundamental to strategy research, it is one to which we lack a clear answer. As strategy researchers we believe that some firms consistently outperform others, and we have some evidence consistent with this belief (Rumelt, 1991; McGahan and Porter, 1997). We also have a number...

U.S. taxpayers funded $14.8 billion of health related research last year, four times the amount that was spent in 1970 in real terms. In this paper we evaluate the impact of these huge expenditures on the technological performance of the pharmaceutical industry. While it is very difficult to be precise about the payoffs from publicly funded researc...

Recent work linking the adoption of key organizational practices to productivity raises an important question: if adoption increases productivity so dramatically, why does adoption across an industry take so long? This paper explores this question in the context of one particularly interesting practice, the adoption of science driven drug discovery...

We examine the impact of publicly funded biomedical research on the in-house research of the for-profit pharmaceutical industry. Qualitative analysis of the history of the discovery and development of a sample of 21 significant drugs, and a program of interviews with senior managers and scientists reveals a complex and often bidirectional relations...

Australian and New Zealand environmental economists have played a significant role in the development of concepts and their application across three fields within their subdiscipline: non-market valuation, institutional economics and bioeconomic modelling. These contributions have been spurred on by debates within and outside the discipline. Much o...

This paper explores the recent explosion in university patenting as a source of insight into the changing relationship between the university and the private sector. Before the mid-1980s, university patents were more highly cited, and were cited by more diverse patents, than a random sample of all patents. More recently several significant shifts i...

The authors examine the interface between for-profit and publicly funded pharmaceuticals. Firms access upstream basic research through investments in absorptive capacity in the form of in-house basic research and 'propublication' internal incentives. Some firms also maintain extensive connections to the wider scientific community, which they measur...

Modern economies are characterized by a significant division of labor in the production of scientific and technical advance. In broad generalization, universities, other non-profit institutes and government laboratories pursue fundamental scientific and engineering research with little expectation of immediate commercial result. In contrast, privat...

Despite much debate in the strategy literatures, there is little consensus as to whether organizational capabilities or market competition are more important in shaping firms’ actions and performance. We suspect that simply comparing firm-level and industry-level influences will continue to prove fruitless for two reasons. In the first place, both...

This paper is an attempt to quantify key aspects of innovations, 'basicness' and appropriability, and explore the linkages between them. We rely on detailed patent data. particularly on patent citations, thus awarding the proposed measures a very wide coverage. Relying on the prior that universities perform more basic research than corporations, we...

We empirically examine interaction between the public and private sectors in pharmaceutical research using qualitative data on the drug discovery process and quantitative data on the incidence of coauthorship between public and private institutions. We find evidence of significant reciprocal interaction, and reject a simple "linear" dichotomous mod...

We examine the relationship between firm size and research productivity in the pharmaceutical industry. Using detailed internal firm data, we find that larger research efforts are more productive, not only because they enjoy economies of scale, but also because they realize economies of scope by sustaining diverse portfolios of research projects th...

Includes bibliographical references (p. 24-27).

The history of many industries can be characterized as a series of technological ‘life cycles’. This has led some to argue that the limits to a technology are a predictable function of its underlying physics and the structure of the dominant design. This paper uses the unexpectedly long old age of optical photolithographic alignment technology to s...

This paper contributes with empirical findings to European co-inventorship location and geographical coincidence of co-patenting networks. Based on EPO co-patenting information for the reference period 2000-2004, we analyze the spatial con figuration of 44 technology-specific co-inventorship networks. European co-inventorship (co-patenting) activit...

Recent advances in the theoretical literature have greatly expanded our understanding of the forces that shape the competitive dynamics of research and development, but a paucity of sufficiently detailed empirical data has left these insights relatively untested. We draw on unusually detailed qualitative and quantitative infernal data provided at t...

We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 fi...

This paper presents the results of a study of the determinants of research productivity in the pharmaceutical industry. Using disaggregated, internal firm data at the research program level from ten major pharmaceutical companies, we find no evidence of increasing returns to scale at either the firm or the research program level. However our result...

Neoclassical theory suggests that when an industry is shaken by radical technological change, incumbent firms will be replaced by entrants because entrants have greater strategic incentives to invest in radical innovation. Organizational theory suggests that incumbent firms fail in the face of radical innovation because they fall prey to inertia an...

We compare the geographic location of patent citations with that of the cited patents, as evidence of the extent to which knowledge spillovers are geographically localized. We find that citations to domestic patents are more likely to be domestic, and more likely to come from the same state and SMSA as the cited patents, compared with a “control fr...

Includes bibliographical references (p. 25-27).

Includes bibliographical references (p. 13-14).

We explore the use of patent citations to measure the "basicness" and appropriability of inventions. We propose that the basicness of research underlying an invention can be characterized by the nature of the previous patents cited by an invention; that the basicness of research outcomes relates to the subsequent patents that cite an invention; and...

This paper demonstrates that the traditional categorization of innovation as either incremental or radical is incomplete and potentially misleading and does not account for the sometimes disastrous effects on industry incumbents of seemingly minor improvements in technological products. We examine such innovations more closely and, distinguishing b...

Thesis (Ph. D.)--Harvard University, 1988. Includes bibliographical references.

How has innovative and competitive behavior in computing and internet markets evolved over the past half century? In the first section of this review, I discuss these questions in light of six topics: the limited role for technology push; the diffusion of general purpose technologies; the organization of proprietary platforms; the presence of asymm...

Outlines tools for formulating and evaluating technology strategy, including an introduction to the economics of technical change, models of technological evolution, and models of organizational dynamics and innovation. Topics covered include: making money from innovation; competition between technologies and the selection of standards; optimal lic...

Sumario: The continued vitality of the most successful U.S. and European pharmaceutical companies, in the face of accelerating scientific and technological change, holds valuable lessons for managers in all industries trying to respond to turbulent times. The pharmaceutical industry faces some serious challenges in the future, most notably the prop...