Why Do Firms Differ? 69 oherent and accepted strategy, decision making THE EVOLUTION OF TECHNOLOGY about rival claims on resources has no legitimate basis. Decisions from above have no supportive In real capitalist economies, in contrast with the rationale, and there is no way to hold back log neoclassical models, technical advance proceeds olling bargaining among claimants other than through an evolutionary process, with arbitrary high level decisions. There is no real products and processes competing with guidance regarding the capabilities a firm needs other and with prevailing technology in real time, to protect, enhance, or add in order to be rather than solely in ex-ante calculation. Some fective the next round of innovative of the innovations will be winners, other losers With the vision of hindsight the whole process But I think I simply am restating what looks messy and wasteful, and a more coherent Chandler, Lazonick, Williamson, and other schol- planning approach to technological advance ars of the modern corporation, have been saying appears attractive requires that firms innovate and change, a firm misguided efforts to plan and control significand for some time. To be successful in a world that However, it is striking how inefficient and must have a coherent strategy that enables it to technical advance have been. Where, for one decide what new ventures to go into and what reason or another, society has been denied the to stay out of. And it needs a structure, in the advantages of multiple independent approaches sense of mode of organization and governance, to advance technology, which flows naturally that guides and supports the building and from a basis of independent rivalrous firms sustaining of the core capabilities needed to carry almost always the approach chosen has turned out that strategy effectivel out. after the fact, to have major limitations If one thinks within the frame of evolutionary And since alternatives had not been developed theory, it is nonsense to pre that a fir calculate an actual'best'strategy. A basic premise comparison, there has been lock in. A number of evolutionary theory is that the world is too of U.S. military R&D efforts since 1960 are complicated for a firm to comprehend, in the striking examples. Nuclear power programs are irm understands its world in another. The fact is that in virtually every field neoclassical theory. There are certain character- where we have had rapid technical advance that istics of a firms strategy, and of its associated has met a market test or its equivalent, we have structure, that management can have confidence had multiple rivalrous sources of new technolog will enhance the chances that it will develop the While Winter and I formally modelled company apabilities it needs to succeed. There are other r&d programs as generating results through a characteristics that seem a prescription for failure. random draw, in fact in the industries that I However, there is a lot of room in between know well there has tended to be a certain where a firm(or its management)simply has to consistency in the r&D efforts of particular lay its bets knowing that it does not know how compa This consistency reflects a basically they will turn out stable company 'strategy, and the core R&D Thus diversity of firms is just what one would and other dynamic capabilities it has expect under evolutionary theory. It is virtually to carry it out. Where company strategies and inevitable that firms will choose somewhat associated capabilities differ significantly, their different strategies. These, in turn, will lead to patterns of innovation are likely to differ signif firms having different structures and different core cantly as well pabilities, including their r&D capabilities. This has an important consequence often Inevitably firms will pursue somewhat different overlooked in the literature on technological paths. Some will prove profitable, given what imitation. When one firm comes up with a other firms are doing and the way markets successful innovation, its competitors may differ evolve, others not. Firms that systematically lose significantly among themselves in their ability money will have to change their strategy and effectively to imitate or develop something structure and develop new core capabilities, or comparable. Contrary to many economic models operate the ones they have more effectively, or effective technological imitation very often drop out of the contest requires the imitating firm to go through many