Does the Middle Conform or Compete? Quality Thresholds Predict the Locus of Innovation
Organization Science · 2019 · Volume 30 · Issue 1
Abstract
Where does innovation come from? This research models producer incentives to innovate with a focus on the role of audiences in constructing quality thresholds within markets. Market audiences create mechanisms for identifying the highest-quality producers in a market. I highlight a key distinction between fixed quality thresholds (such as accreditations) and quality thresholds that respond to producer quality (such as rankings or best-of-breed awards). Producers evaluate how the inherently risky nature of innovation interacts with these thresholds. The model predicts conditions under which innovation emerges from the best producers in a market, from producers near the threshold in a market, from both, or from nowhere. Such predictions generalize and simplify several existing organizational theories of innovation. The online appendix is available at https://doi.org/10.1287/orsc.2018.1240 .
Keywords
innovation, competition, market categories, middle-status conformity
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