Who Drives Digital Innovation? Evidence from the U.S. Medical Device Industry
Does the large-scale technological change that is characteristic of an industry-wide digital transformation entrench industry leaders or enable the rise of new entrants? We offer a novel approach to this question by studying the medical device industry, a unique setting in which we observe all new product commercialization over several years and in which the introduction of software has created fresh opportunities for new product development. Pioneering a new application of text analysis, we consider over 35,000 new medical devices that came to market in the United States from 2002 to 2016 in order to identify digital products. We examine the relative importance of within-firm know-how, geography, and financial resources in predicting digital new product development. We find that prior product-area commercialization experience and location in a region of concentrated expertise reinforce one another as predictors of digital innovation. Access to financing through public capital markets and venture capital are also positive predictors, but the magnitudes of these effects are smaller and do not appear to compensate for past product experience or geography. We conclude that the digital transformation of the medical device industry is disproportionately driven by product area and geographic incumbents.
Keywords: innovation; medical devices; digitization; medical technology; Technological Innovation; Software; Market Entry and Exit; Industry Growth; Medical Devices and Supplies Industry; United States;
Citation:
Foroughi, Cirrus, and Ariel Dora Stern. "Who Drives Digital Innovation? Evidence from the U.S. Medical Device Industry." Harvard Business School Working Paper, No. 19-120, June 2019. View Details