advertisement
advertisement

Innovation: Build or Buy?

During the tech boom of the late ’90s, many large companies tried to buy smaller companies developing disruptive tachnologies — rather than developing them themselves. Cisco, for example, acquired 70 companies between 1992 and 2000, and just two in 2001.

advertisement
advertisement
advertisement

During the tech boom of the late ’90s, many large companies tried to buy smaller companies developing disruptive tachnologies — rather than developing them themselves. Cisco, for example, acquired 70 companies between 1992 and 2000, and just two in 2001.

advertisement

Many of those purchases were made based on a set of assumptions that Wharton professor Saikat Chaudhur now says are flawed. In a recent Knowledge@Wharton feature, Chaudhur outlines four challenges faced when buying innovation. Among them:

  • integrative complexity due to technological incompatibilities
  • integrative complexity due to the “maturity” of a target company
  • the unpredictability of a product’s performance trajectory (“technical uncertainty”)
  • the unpredictability of that product’s market (“market uncertainty”)

What do you think is the beter route: building or buying innovations? If the latter, what have you learned in terms of making such an acquisition succeed?

advertisement