Firm Size and Product Innovation

Abstract

The linkage between firm size and product innovation has frequently been discussed by both researchers and other writers. John Ettlie and Albert Rubenstein report the results of a study which, by distinguishing between the incorporation of radical and incremental technology, attempts to resolve some of the controversy surrounding this issue. In particular, the authors hypothesize that up to a certain point, large firms with greater resources are more likely to commercialize radically new products successfully. Findings generally support this theory but refinements to the model are now possible. For example, firms with 1000 employees or less need not be excluded from radical product introduction if they resolve critical funding and research problems. This size-radicalness distribution is shaped like a fish hook or a claw. That is, up to about 1000 employees, there is no significant relationship between number of employees and radicalness of a new product. Between 1200 and 11,000 employees there is a significant, direct relationship. Finally, very large organizations (in excess of about 45,000 employees) are unlikely to introduce radically new products. Larger firms were significantly more likely to adopt ambitious new processing technologies in order to introduce these new products. Also, new product success was significantly predicted by the absence of funding problems in introducing the innovation and the degree to which the new product was a radical departure from existing practice.

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