Understanding the motivations of technology managers in radical innovation decisions in the mature R&D firm context: An Agency theory perspective

Economic and management theory predicts that mature R&D organizations will underinvest into radical technological innovation. Recent research, however, highlights how many established R&D companies often do aggressively invest into radical innovation, but never truly reap the full benefits of their early investments. In order to investigate this paradox, we ground our paper in Agency-theory and focus on the role corporate governance plays in enabling R&D project managers and their teams to commercialize radical technologies. We use a longitudinal multi-case comparison design to examine the corporate governance systems of twelve industry-leading companies, all with a strategic mandate to commercialize radically innovative technologies on a continuing basis. Agency theory's explanation for this puzzle is that incumbent firms struggle with radical innovation because opportunistic managers overinvest free cash flows into radical ideas, with limited commercial value. Yet, our unique access to the complete process of radical innovation shows that the challenge lies less in the middle manager's desire to enrich themselves at the expense of the shareholders. On the contrary, it arises more from a failure to suitably select, incent and monitor the commercialization activities associated with technological innovation, the farther removed it is from the initial recognition of the opportunity.