Why do incumbent firms favor incremental innovation over radical innovation?
What will be an ideal response?
Incumbent firms favor incremental innovation over radical innovation for the following reasons.
• Once an innovator has become an established incumbent firm, it has strong incentives to defend its strategic position and market power. An emphasis on incremental innovations strengthens the incumbent firm's position and thus maintains high entry barriers.
• From an organizational perspective, as firms become established and grow, they rely more heavily on formalized business processes and structures. In some cases, the firm may experience organizational inertia-resistance to changes in the status quo. Incumbent firms, therefore, tend to favor incremental innovations that reinforce the existing organizational structure and power distribution while avoiding radical innovation that could disturb the existing power distribution.
• A final reason incumbent firms tend to be a source of incremental rather than radical innovations is that they become embedded in an innovation ecosystem: a network of suppliers, buyers, complementors, and so on. They no longer make independent decisions but must consider the ramifications on other parties in their innovation ecosystem.
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