Exploratory innovation and exploitative innovation in the phase of technological discontinuity: the perspective on patent data for two IC foundries

This study investigates how firms manage different innovation modes in the context oftechnological discontinuities. Using the aluminium-to-copper transition process, wecollected patent data from the time period 1997 to 2001 for the top two firms in the ICfoundry industry, the Taiwan Semiconductor Manufacturing Company and the UnitedMicroelectronic Corporation. We suggest that environmental responsiveness to technologicaluncertainty can provide a background for understanding how incumbent firms respond tomanagerial challenges associated with the exploratory–exploitative innovation tension. Thestatistical results indicate that incumbent firms simultaneously conduct exploratory andexploitative innovation and, furthermore, engage in significantly more exploratoryinnovation than exploitative innovation when faced with technological discontinuities.