Old Dogs, New Tricks

A study finds companies in mature industries to be just as innovative as New Economy upstarts

Picture a highly innovative company. Chances are, what comes to mind is a scrappy startup in an emerging, red-hot industry. That's because the conventional wisdom has long equated innovation with youth and dismissed older companies in mature industries as less creative.

But a recent study by two professors from Boston University and Harvard Business School casts doubt on that bias toward the young. Using patents as a measure of innovation, the study found that, on the whole, companies in mature industries were just as active in developing new technologies as were companies in cutting-edge fields.

The study, slated to be published in the International Journal of Industrial Organizations, also dispels a long-held belief about industry life cycles: the idea that companies in more mature fields tend to focus on innovations related to processes, rather than products.


  The study did, however, find a few key differences: Compared to companies in newer industries, corporate leaders in mature industries tend to seek more patents outside of their core businesses. And they tend to seek more patents in partnership with smaller companies. In the biotech industry, for example, it's common for large drugmakers to align themselves with small startups to develop new gene-based treatments and therapies.

So what's the lesson for entrepreneurs? Don't assume there's less room for innovation in a mature industry. At the same time, startups shouldn't assume they've got the upper hand in creating breakthrough technology. "The bottom line is, nobody can afford to be smug," says Anita M. McGahan, professor of strategy and policy at Boston University's School of Management, who conducted the study along with Harvard Business School Professor Brian Silverman.

By Julie Fields

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