Incumbent Resurgence: Lessons from the U.S. Machine Tool Industry, 1975-2000

This proposal seeks to examine the adaptation of firms in the U.S. machine tool industry to changes in their environment, to understand the factors affecting firms' capability to transition to computer-numerically controlled designs and modular production techniques, as well as more extended relationships with customers required by this equipment. Many U.S. manufacturers lacked the skills to respond, and as a result employment in the industry and its importance to the domestic economy was substantially reduced. Nevertheless, other firms not only survived but thrived in the changed environment. This study will trace the responses of U.S. machine tool incumbents to the technological and market challenges facing the industry between 1975 and 2000 to discern the differences between failing and surviving firms.

Prior studies have focused on factors that lead to behavioral inertia, offering little insight for how firms act when not demonstrating inertia, or how performance is affected by these behaviors. The researchers suggest that incumbents may exhibit three types of responses to change: (1) They may continue with their existing strategy; (2) they may imitate new entrants' products; or (3) they may innovate away from both their existing products and those offered by rivals. The strategy a firm enacts, and its effect on the firm's survival and performance is expected to depend upon the adaptability of the firm's competencies at the time of competitive challenge. Thus this study goes beyond extant literature by empirically investigating the proposed tradeoff between survival and performance, by focusing on survivors of radical technological change, and by exploring the relative influence of accumulated competencies and firm choice in affecting these outcomes.