The role of collaboration in emerging industries: The case of smart grids in the UK

Abstract

This dissertation explores the initial stages of emergence of a new industry over three chapters. Emerging industries offer innovating firms substantial opportunities; however, the technological and cognitive uncertainty, lack of legitimacy, fierce competition and often institutional misalignment that characterise this initial period, make it challenging for firms to navigate. Furthermore, it is important for innovating firms to understand the complex dynamics that take place during the initial stages of industry emergence because they influence later developments of significant material interest, such as technological standards. The first chapter reviews the literature on the emergence of new industries and develops a research agenda that guides the two empirical chapters that follow. A considerable body of work has focused on understanding the process by which new industries emerge and develop, identifying three phases in this process, each with distinct challenges and opportunities. However, this literature does not specifically address the transformation of established industries triggered by pervasive digitalization. Two unique characteristics of digital innovations, generativity and convergence, have significant implications for the dynamics associated with technological change and industry emergence. First, ecosystems gain strategic importance because the focus of innovation shifts from the firm level to the ecosystem level, and second, the heterogeneity of actors that need to get involved in the development of a digital innovation increases, adding complexity to some of the process associated with nascent industries, such as creating a collective identity. Following a review of the literature on new industry emergence and ecosystem dynamics, I identify new challenges to the emergence of new industries that form following the introduction of a digital innovation, and develop a framework for future research. The second chapter explores the role of collective actors in the emergence of a new industry triggered by a digital innovation focusing on how that role changes over time and on how innovating firms strategically engage with their activity as the industry evolves. Drawing from an inductive case study of the development smart grids in the UK, I find that initially, collective actors legitimise the case for change in the incumbent system and develop a collective understanding of the new industry. During this early phase, innovating firms engage with collective actors to “make space” for their novel technology by educating and promoting their vision of the new industry. In the second stage, collective actors theorise value ecosystems and develop a supportive institutional infrastructure. During this stage, innovating firms turn their attention to providing evidence of the value of their technology and removing barriers to its adoption. The third chapter investigates the determinants of the collaboration strategies of new technology firms in emerging industries with ecosystem structures. Through an inductive, longitudinal study of the collaborative innovation activities of 16 new firms developing smart grid technologies in the UK, I identify four distinct collaboration strategies that vary in timing and scope. I propose that these four collaboration strategies are driven by a new firm’s resource munificence and its dependence on ecosystem innovation for its novel technology to create value. This dissertation contributes to the literature on emerging industries in two ways. First, it extends co-evolutionary models of industry emergence by identifying new mechanisms of interaction between institutional and technological processes. Second, it highlights the changing role of collective actors as the industry progresses which dictates the opportunities for firms to engage with their activity. Finally, this dissertation extends theories of cooperative innovation behaviour by identifying factors, both internal and external to a firm, that make depth and breadth of collaboration beneficial to its innovation activity.