How Does Technological Crowding Affect Exploratory Innovation? Considering the Moderating Role of Technological Superiority

Abstract

This article anchors itself in knowledge network theory and rivalry theory to explore the antecedents of exploration by examining the possibility of technological crowding, that is, a firm position in crowded technological fields, as the enabler of firms’ exploratory innovation performance. For this purpose, we adopted regression analysis for panel data with fixed effects and considered the data of 4100 firm-year observations of Taiwanese listed companies in the electronics industry from 2000 to 2021. The findings suggest that technological crowding urges firms to pursue exploration to ease heightened competition intensity and crowd out their competitors. Recalling the literature on the competency trap phenomenon in which some dominant firms may exhibit technological superiority underperformance, we further propose that the dark side of technological superiority is more visible when firms are positioned in crowded technological areas. Specifically, firms with stronger combinatorial capabilities or greater technological prestige refrain from investing in exploration because they are tied with high couplings between their homogeneous knowledge elements and indulge themselves in existing success. Our findings remain robust after adjusting the window of research and using the negative binomial regression with fixed effects based on the alternative measure of exploratory innovation. This article contributes significantly to the literature on technological position and knowledge networks by shedding light on the critical role of technological crowding in propelling firms’ exploration efforts. Our results also offer significant implications for executives in dominant firms and policymakers to become more aware of the competency trap and seek ways to span technological boundaries.