THE DISTRIBUTION OF R&D EFFORT IN SYSTEMIC INDUSTRIES: IMPLICATIONS FOR COMPETITIVE ADVANTAGE

Systemic industries comprise groups of firms making component products that are valued as complements by consumers (PC, automobiles, aircraft, networking). In this study, we investigate the distribution of research effort across the technological system by individual firms as a basis for building competitive advantage. Our empirical setting is a sample of component makers in the personal computer system. We show that even in a sample dominated by focused component manufacturers, diversified research effort in the broader technological system improves R&D productivity in the component technology. Broad scope R&D in the rest of the system also increases the marginal benefits of research efforts in the component technology, though at a diminishing rate. We explore the determinants of this complementarity between the scope of system level research and the focus on component level research, and derive implications for competitive advantage.