Wither Core Competency for the Large Corporation in an Open Innovation World

Abstract

This paper tries to give an answer to the question, what has happened to the core competency perspective in corporate strategy and innovation that in the early 1990’s was widely recognized as constituting the critical fundament for obtaining competitive advantage among large innovative companies. The paper contains three main sections. The first gives an outline of the dominant logics of corporate strategy and innovation in the late 1980s and early 1990s. This is done through a review of the most important literature on these matters from that period. In particular one stream of literature was associated with the emerging resourceand knowledge-based view of the firm and its strategy and focused on (core) competencies, vertical integration and technology-related diversification. Introvert modes of innovation were argued to be the standards to be met for large successful companies. The second section reviews the empirical trends in corporate and innovative dynamics since the early 1990s. Numerous studies indicate robust tendencies towards a) vertical disintegration, implying extended outsourcing not only of manufacturing but also of much component-based innovation, b) broadening the scope of the corporate technology base while narrowing the scope of production. These tendencies have prompted a fresh view on the classical issue of the boundaries of the firm, and recent studies point to the increasing role of large companies as system integrators, innovation architects, or in short, market coordinators of increasingly distributed value chains. These tendencies are consistent with the new paradigm of Open Innovation, but how do they relate to the “old” core competency view? And how do they change the boundaries of respectively the large and small firm. To illustrate this issue the last section presents a case study on the current transformation in amplifier technology within the consumer electronics industry. Withering Core Competency for the Large Corporation in an Open Innovation