Title: Innovation in the ''Baby Bell'' companies: a comparative longitudinal analysis

Authors: Jei-Ching Chen, Pier A. Abetti, Lois S. Peters

Addresses: Chungwa Telecom Co. Ltd, Taiwan. Lally School of Management and Technology, Rensselaer Polytechnic, Institute, 110 8th Street, Troy, NY 12180-3590, USA. Lally School of Management and Technology, Rensselaer Polytechnic Institute, 110 8th Street, Troy, NY 12180-3590, USA

Abstract: The worldwide trend of deregulating monopolistic service industries, and in particular established telecommunication companies, raises a major issue: how do the former protected and implementation-minded companies compete with the new entrepreneurial entrants? How are these companies building their innovation capabilities? This paper addresses the question: how is innovation associated with organisational strategy, change and structure within an industry, given the same past history, and similar environments and resources? It investigates the case of the seven ||Baby Bells|| that were set up by court order in 1984 after the divestiture of AT&T. These companies had shared the same company history for almost a century, had similar resources and were subject to the same regulatory and market environments. Given this similarity of origins, regulatory and market environment and the original common R&D base, the case of the ||Baby Bells|| provides a natural unique environment for studying the process of building innovation capabilities and the results of this process. Three dependent variables were selected to represent tangible results of innovation: number of patents, new services offered, and diversification as expressed by non-telephone, non-regulated revenues; and eleven independent variables, ranging from R&D expenditures to the utilisation of equipment with advanced technology such as digital switches and fibre-optic channels, plus organisation measures, such as rate of technical and administrative change, professional intensity, inter-firm linkages and joint developments. The data were collected for a period of eleven years (1984–94) from a variety of sources, and analysed by Spearman correlation, multiple regression and canonical correlation. The principal results of this research show that, with other factors constant: (1) acquisition of patents is positively related to joint development, emphasising product differentiation, and technical change, (2) acquisition of patents is negatively related to inter-firm linkages (inter-firm interactions excluding joint developments), (3) the introduction of new services is positively related to joint development, emphasising core competencies, and administrative change, (4) promotion of non-regulated revenues is positively related to emphasising core competencies, and (5) innovation is negatively related to management intensity. The paper concludes with implications for managers of telecommunication companies.

Keywords: AT&T; Baby Bells; Bellcore; core competencies; deregulation of telecommunications; technological innovation; telecommunication policy; telecommunications services.

DOI: 10.1504/IJTM.1998.002626

International Journal of Technology Management, 1998 Vol.15 No.6/7, pp.761-780

Published online: 01 Aug 2003 *

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