The Role of Culture in Developing Disruptive Innovation in Domestic Firms

Introduction

Existing literature on innovation has elaborated on the different types of innovations a firm may pursue. One type of innovation which has not received much attention is disruptive innovation, specifically in an international business context (Sandberg & Hansen, 2004). Disruptive innovations are simple adaptations to existing technologies that appeal to customers who were not attracted to previous products (Christensen, 1997). To develop such innovation, the firm must seek change and question current practices. The literature clearly shows that certain cultures are more apt to seek change while others may be resistant to change. This leads to the question, what role, if any, does culture play in a firm’s pursuit of disruptive innovation?

Hofstede’s five cultural dimensions (Hofstede, 1980; Hofstede & Bond, 1988) are well documented in terms of their ability to assist in understanding cultural differences. Researchers have used Hofstede’s cultural dimensions to review the relationship between new product development and national culture. For example, Waldman, Luque, Washburn, and House (2006) build their study on the assumption that societal-level values predict the values at the firm level. From Nakata and Sivakumar (1996), it can be seen that national culture will have an influence over the direction of research and development (R&D) inside the firm. For instance, Morris, Davis, and Allen (1994) find that certain levels of individualism lead to more corporate entrepreneurship. Similarly, Shane (1992; 1993) finds individualistic- and low-power distance societies have more patents and trademarks. The key discovery of Jones and Davis (2000) is that national cultures affect innovation and the location factor for innovation should be a major consideration for any firm. Thus, when analyzing different types of innovation, it is important to understand culture.

To identify true national culture effects, this chapter will look at the perspective from domestic firms rather than Multinational Companies (MNCs). This is not to say these cultural relations do not hold true for other types of firms with their innovation. MNCs operate in several different countries, all with unique cultures. Operating in different cultures could potentially form a cosmopolitan perspective or create a cornucopia of all of the mixed cultures put together (Cantwell & Piscitello, 2000). Thus, keeping the perspective on domestic firms allows the ability to capture the truest form of the cultural effects. Additionally, to maintain a competitive advantage over MNCs, domestic firms must be more adaptive to local needs (Bartlett & Ghoshal, 1989). This requires a more in depth knowledge of the national culture, from the internal processes and decision to the exchange with customers.

Johne (1984) states there are two phases of product development: initiation where the idea is generated and tested, and implementation where the product is fully developed and launched into the market. For the purpose of this study, only the first phase will be examined to see the effect that culture has on a firm’s intention to pursue either disruptive or sustaining technologies. Pursuing disruption is a priority and mindset which the firm must adopt (Jalinek & Schoonhoven, 1993); otherwise, it will not pursue it. Thus, this chapter is not focused on implementation and market adoption of the disruptive innovation. Others have already explored in depth the diffusion and adoption of innovations in different nations (Dwyer, Mesak, & Maxwell, 2005; Steenkamp, Hofstede, & Michel, 1999). It is more relevant for this chapter to examine if different domestic firms which sit in different cultures even seek to pursue a disruptive strategy. The intent of proactiveness in disruption provides more of the firm-level actions.