Innovation, Resource Allocation, and Corporate Strategy

Abstract

The resource-based view (RBV) emphasizes how a firm’s unique resources and capabilities can establish competitive advantages, particularly in facilitating innovation and diversification (Barney, 1991; Eisenhardt & Martin, 2000; Teece et al., 1997). According to the RBV, a firm's unique resources are vital for developing new products and processes (Teece et al., 1997), and they can offer cost or differentiation advantages when a firm enters new markets or business segments (Helfat & Lieberman, 2002; Rumelt, 1974). Despite the valuable insights that the RBV offers, two aspects warrant further investigation: how changes in market conditions affect resource allocation and how such resource allocation influences firm strategy. A lack of understanding in these areas limits our knowledge in several key scenarios, including the following three: First, we have yet to fully understand how changes in competition affect innovation and how firms with varying technical capabilities respond to competitive shifts. Second, the interdependence between two primary forms of resource allocation—resource sharing and resource redeployment—remains insufficiently analyzed. In particular, it is unclear how this interdependence influences market entry following changes in demand conditions. Finally, advancing corporate strategy research requires a deeper understanding of how firms redeploy indivisible resources in response to demand fluctuations. My dissertation aims to further our understanding of these three scenarios by combining theoretical models with empirical analyses. Study I investigates how competition influences process innovation, arguing that increased competition reduces innovation efforts, especially among high-capability firms. Study II examines the interdependence between resource sharing and resource redeployment, focusing on how this relationship affects market entry strategies. Study III analyzes the redeployment of indivisible resources following negative demand shocks. This study demonstrates that larger-unit-capacity resources are more likely to be redeployed, driven by underutilization and sensitivity to demand variability. Together, these studies advance theoretical and empirical understanding of resource allocation strategies, offering actionable insights for firms navigating competitive pressures and market uncertainties.