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Exploring the boundary conditions of disruption: Large firms and new product

introduction with a potentially disruptive technology in the Industrial Robotics industry

Raja Roy

Assistant Professor of Management and Entrepreneurship

LeBow College of Business

Drexel University

E-mail: raja.roy@drexel.edu

Accepted for publication at

IEEE Transactions on Engineering Management

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Abstract

We explore the boundary conditions of Christensen’s theory. Using technological

changes that were potentially disruptive to the manufacturers of industrial robots as the context,

we find that, unlike Christensen’s suggestions, large hydraulic robot manufacturers introduced

new products with the disruptive technology fairly early during the changes. By comparing the

robotics industry with the disk-drive industry, we extend Christensen’s theory by expanding the

boundary conditions of the theory.

Keywords/phrases: Disruptive technological change; Competence-destroying technological

change; Component and architectural capability

Managerial relevance statement:

This paper suggests that managers need to be cautious while responding to disruptive

technological changes. While extant research suggests that firms whose internal systems and

processes are consistent with those required to respond to technological disruption, can respond

to disruptive changes, our paper highlights that pre-existing capabilities can explain which firms

are more likely to respond to disruptive changes. Since disruptive technological changes are

becoming more prevalent, managers need to strategically build up capabilities in various

technological fields so as to avoid the pitfalls of disruptive technological changes.

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Exploring the boundary conditions of disruption: Large firms and new product

introduction with a potentially disruptive technology in the Industrial Robotics industry

Christensen’s [1] research on technological disruption has had profound effects on the

technological change literature. By suggesting that technologies, that are initially inferior, can

eventually displace mainstream technologies and challenge existing large firms, Christensen

shed new lights on how managers and scholars approach technological evolution and

competition. Subsequent research by Adner [2], Danneels [3], Christensen [4] and others, has

expanded our understanding of when a technological change is potentially disruptive for a large

firm, where a potentially disruptive change is one in which large manufacturers like RCA or

DEC face “innovator’s dilemma” because their value systems and processes lead them to

deliberately ignore the threat [5]. Theory predicts that large firms either do not to respond to the

threat (i.e., do not introduce new products with the new technology) or, are late in introducing

the new products.1

Literature (see e.g., [7]) provides several evidences of exceptions to the phenomenon of

disruptive technological change (henceforth referred to as “disruption”). These exceptions raise

yet unanswered questions, such as, “if the processes and value systems of large firms, such as

DEC [1], prevent them from introducing new products, then how does one explain Sony’s

decision to introduce successive generations of new products with new technologies, including

1 See e.g., [6; p.43], “Apple Computer……lagged five years behind the leaders in bringing its

portable computer to the market” and [6; p.44], “these same companies are rarely in the forefront

of commercializing new technologies that don’t initially meet the needs of mainstream customers

and appeal only to small or emerging markets.”

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some potentially disruptive ones, such as, the advent of the LCD TV?” and “if RCA faced

innovator’s dilemma due to their processes and value systems [5], how did a large manufacturer

like Mergenthaler Linotype [9] overcome those inertia during potentially disruptive changes?”

These unanswered questions prompt us to investigate if the boundary conditions for disruption,

i.e., the reasons for large firms not introducing new products during potentially disruptive

changes are more nuanced that what the literature suggests. In other words, the question “under

what conditions does a large firm responds to the potentially disruptive change by introducing

new products with the new technology?” begs an answer if we are to have a rich theoretical

understanding of the boundary conditions of the theory [8].

To address this gap in the literature, we build on research that has investigated the role of

firms’ capabilities [e.g., 9]. The link between pre-existing capabilities of firms, especially the

related ones that firms can utilize to introduce new products during a potentially disruptive

threat, can be critical for firm performance during disruption. Although, [6; p.48] observed that

the lack of technological capability was not the cause of disruption (“Engineers at Seagate were

the second in the industry to develop working prototypes of 3.5-inch drives.”), Christensen later

[4; p.51] alluded to the role of technological capabilities in disruption when he observed that

some potentially disruptive innovations may be “unattainable to the incumbent leaders, because

the technology or capital requirements are simply beyond the reach of the incumbent leaders.”

Thus, an investigation of the technological capabilities of large firms might help researchers

develop a nuanced understanding of why some large firms introduce new products with the

potentially disruptive technology and others either do not introduce such products or are late in

doing so.

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To seek the answer to our research question, we concentrated on the industrial robotics

industry from the early-1970s to mid-1990s. The pioneers of industrial robots manufactured

robots with hydraulic actuators. These manufacturers were challenged in the 1980s by robots

made with electrical actuators. While robots made with the two types of actuators were not

substitutes, i.e., these products targeted two different product markets with two different “critical

performance feature” [6; p.45], by the mid-1990s technological improvements in electrical

technology ensured that robots with electrical actuator were able to meet the needs of some of

the users of robots with hydraulic actuators. Thus, during the time-period of our study,

manufacturers of hydraulic robots faced a potentially disruptive threat from robots with electrical

actuators.

To foreshadow our findings, we investigated the 10 largest global robot manufacturers

during the period 1970s-1990s. We find that, a) most of the large hydraulic robot manufacturers

had introduced robots with electrical actuators except, Prab, which lacked the relevant pre-

existing capability needed to manufacture robots with electrical actuators, and b) the largest

market-share holder, Unimation, which also lacked the pre-existing capability relevant to

electrical actuators, was one of the early movers to acquire the new capability and introduce

robots with electrical actuators. Our research suggests that when the large firms possess the

relevant pre-existing capability and the expected demand of the products made with the

sustaining technology is uncertain, they are likely to respond by introducing new products with

the disruptive new technology.

Next, we discuss the relevant literature. Thereafter, we discuss the context of this study,

the findings, and the implications of this study.

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Literature Review

The notion of disruption has been formulated and refined by Christensen [1], [4], Adner

[2], Christensen and Overdorf [5], Danneels [3], Henderson [10], Govindarajan and Kopalle [11]

and others. Some of the early research (e.g., Christensen [1]) identified the major constructs of

this theory- the “performance trajectories” of sustaining and disruptive technologies and “critical

performance feature” of the products that customers wanted. These constructs sought to explain

the circumstances in which large firms could not respond to the challenge from smaller firms.

Christensen [1] suggested that the products based on the disruptive technologies are typically

cheaper, smaller, and simpler than the traditional products. However, over time, the disruptive

products are able to meet the requirements of the mainstream customers and causes disruption to

the large firms who listen too closely to their mainstream customers [6].

Several researchers have challenged the above-mentioned notion of disruption and have

suggested that firm-level factors- for example, the possession of technological capabilities ([9],

[12]) - can explain why large firms do not respond to potential disruption. Henderson [10; p.7]

opened the door for such an investigation when she suggested that "...incumbent firms fail to

respond to disruptive innovations because responding appropriately requires building

competencies they are ill-equipped to acquire and not because they focus too much on existing

customers and high-margin opportunities."

The lack of attention to pre-existing firm capabilities, during disruption, in the technology

literature is surprising, since the role of firm capabilities-- especially technological capabilities--

during technological change has been the focus of intense scrutiny among academicians for at

least three decades. Anderson and Tushman [13] linked firm capabilities to a technology’s

evolution and Tushman and Anderson [9] suggested that firms fail to respond to technological

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changes when they are “competence-destroying” ones, i.e., one that “obsolesces and overturns

existing competencies, skills, and know-how” [14]. From this perspective, it seems likely that the

causal mechanism for large firm paralysis during disruption is a competence-destroying

technological change- a change where a firm does not introduce new products with the new

technology because it does not possess the prescient pre-existing capabilities to do so.

Building on Tushman and Anderson [9], Henderson and Clark [12] fine-tuned our

understanding of technological capability when they noted that component and architectural

capability were critical for firms during technological changes. Thus, more specifically, the

reason why a large firm does not introduce new products with the disruptive technology is that it

lacks the relevant pre-existing component and architectural capability necessary to respond to

such changes. This is the hypothesis that we test in this paper. We build up on Henderson and

Clark [12] and concentrate on component and architectural capabilities as the two drivers of

technological capabilities of a firm. In the following subsections, we discuss the pertinent

literature that deals with component and architectural capabilities.

Component capability. The engineering design literature has a long history of

distinguishing between the components and the product as a whole (see e.g., [15]). Clark [16]

defined a component as a physically distinct portion of the product that embodies a core design

concept and performs a well-defined function. According to Vincenti [17], component capability

includes an understanding of technologies and materials embodied in components and the skills

and problem solving strategies accumulated by applying a component. Roy and McEvily [18]

demonstrated that component capability affected the survival prospects of firms. Following these

researchers, we concentrate on component capability as source of persistent performance

differential amongst firms during disruption.

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Architectural capability. Architectural capability of a firm is the ability of a firm to link

the various components, which the firm uses to manufacture its products, in a variety of ways.

Architectural capability affects product performance by determining how, and how well,

individual components fit together (i.e. how the set of components works together to deliver the

product’s functions; cf. [19]). Henderson and Clark [12] observed that accumulated architectural

capability acquired by designing products of the previous generations could blind a firm to the

design changes required to respond to new technologies. Other scholars (e.g., [20]) have used

terms such as integrative and combinative capabilities to suggest that architectural capability

may assist firms in surviving technological transitions by enabling firms to integrate their

component capability in new and flexible ways. Thus, we concentrate on architectural capability

of incumbents as being a source of differential firm performance during disruption.

Next, we discuss the context of this paper and explain the technological changes in the

industrial robotics industry. Thereafter, we explain firm responses to the disruptive threat in

terms of their component and architectural capabilities.

Industrial Robotics industry

Data

Our description of the context is based on the data that we collected from various

secondary sources, including Industrial Robots- A Survey (1972); Specifications and

Applications of Industrial Robots in Japan (1981, 1982, 1984, 1986, 1990, 1992, 1997); Robotics

Industry Directory (1982, 1983); British Robot Association’s Datafile (1982-83, 1987, 1997); A

Survey of Industrial Robots (1980, 1982); Industrial Robot Specifications 1983 (by Cugy and

Page); Industrieroboter (1979); Handbuch Industrieroboter (1982); International Robotics

Industry Directory (1984); International Robotics Products Directory (1989, 1990); Industrial

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Robots Productivity Equipment Series (1983, 1985). Our sample consists of almost 1000

observations of new robot introductions or innovations on existing products by the nine largest

global robot manufacturers. In addition to these, various Robotic Industries Association (RIA)

publications and trade magazines like Industrial Robot, Industrial Robots International, Robotics

Today, Industrial Robots- A summary and forecast (1983), [21], [22], [23], USITC Pub. 1475,

and Society of Manufacturing Engineers Industrial Robots Forecast and Trends (1982, 1985)

provided valuable information. The product introduction data spanned from 1972 through 1997.

We obtained the number of electrical control system patents assigned to each large manufacturer

during 1970-1985 from the USPTO website. We obtained the product-line information for the

large manufacturers in 1980 from their annual reports and from various secondary sources and

trade journals.

Industrial robotics industry: From inception till the mid-1980s

According to the Robotics Industries Association, a generally accepted definition of robot

is “a reprogrammable multifunctional manipulator designed to move material, parts, tools or

specialized devices through variable programmed motions for the performance of a variety of

tasks.” The pioneers of the industry include US firms like Unimation (a subsidiary of Condec

Corp.), Cincinnati Milacron, Versatran, and Prab. Unimation sold the first industrial robot to

General Motors in 1961. By 1969, there were about 20 robots in service in the U.S., and in 1970

the U.S. robot population increased to 200. This number increased to 3849 by 1980. In 1982,

there were about 50 U.S. manufacturers of robots. Two of the largest firms (Unimation and

Cincinnati Milacron) accounted for almost 75% of the total shipments in the U.S.

Japan has been the leader in the demand for industrial robots and USA has been the

traditional second-largest market for robot manufacturers. In 1967, the first robot was imported

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into Japan and, in 1968, Kawasaki Heavy Industries started manufacturing robots in technical

collaboration with Unimation. Subsequently other large firms like Hitachi, Toshiba, Fuji

Electric, and Fanuc started manufacturing robots. Shortage of labor and the oil shocks of the

1970s provided the boost to the industrial robotics industry in Japan. By the end of 1970s,

Japan’s robot population was around 14000 and there were about 140 Japanese robot

manufacturers. The early entrants in the European robot industry were firms like ABB, Olivetti,

and Siemens, and large automobile manufacturers like Volkswagen, Fiat, Renault, and Volvo.

The original product-market where customers demanded high load capacity: The

primary users of robots included automobile manufacturers who were involved in metal casting,

forging, spot welding, painting, machining, assembly, and palletizing. To these users, the critical

performance feature was the load capacity (i.e., the maximum load that the robot’s arm can

carry) ([22], [24]). Traditionally, in the U.S. and Western Europe, spot welding robots are about

30% of total population of robots followed by casting robots. Traditional manufacturers of robots

like Unimation and Prab had relied on hydraulic actuators to control their robots. Robots with

hydraulic actuators (or “hydraulic robots”) could achieve the highest load capacity. In contrast,

robots with electric actuators (or “electrical robots”) could achieve the best repeatability (i.e., the

precision with which a robot can return to the same position). Everything else being equal, the

higher the value of load capacity, the better it is and the lower the value of a robot's repeatability,

the better it is. The main advantage of robots with pneumatic actuators, which had an almost

insignificant market-share, was low cost.

Capabilities needed to manufacture robots with hydraulic actuator: A robot hand (or

the manipulator) is actuated by the command from the controller, which can be a computer or a

teach pendant. In hydraulic robots, these actuators consist of hydraulic motors and pumps

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coupled in a circuit. Pumps generate the required fluid pressure and flow, which is used by

cylinders or motors for actuation. These systems use flowing liquid to transmit the energy from

generation point to actuation point. The generation point is typically a pump that generates the

required fluid power. The pressure generated by the hydraulic pump is distributed to the actuator

through control valves. Component capability needed to manufacture hydraulic robots included

that of hydraulic pump, hydraulic motor, valves, pressure gauges, and so on.

Advent of product-markets that demanded robots with repeatability: Although most

of the early robots utilized hydraulic actuators, changes in both the demand conditions and

technological innovations in electrical control technology ensured that most of the robots

manufactured since the mid-1980s utilized electrical actuators. The advent of computers,

calculators, cell phones, and other electronic gadgets led to the growth of small-parts assembly

product-market which demanded the robots for accurate handling of delicate parts and

repeatability was the critical performance feature for this market (Intelledex Inc. Report

published in Robotics World, June 1983). The electronic assembly plants started relying on

electric robots not only for higher repeatability, as compared to human labor, but also for the

cleaner operations that reduced the chances of contamination of the wafer surface from the

spillage of fluids in hydraulic robots. Demand from electronic product manufacturers fueled a

significant portion of the growth of the industrial robotics industry during the 1980s and 1990s

[25]. Additionally, around this time, small appliances, food processing, and pharmaceuticals

industries also started using electrical robots for high repeatability. Figure 1 highlights the

growing importance of electrical robots and shows the proportions of electrically actuated

assembly robots and hydraulically actuated welding and machine tending robots in the domestic

shipments of robots in the U.S. during late-1970s and early 1980s.

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Insert Figure 1 about here

Capabilities needed to manufacture robots with electrical actuators: In these robots,

electric motors produce angular rotation and torque needed to move the robot arm. Electric

motors are typically assisted by feedback controllers, such as a potentiometer, which keep track

of the position of the robot arm and make necessary corrections to the arm’s location, which

improves the repeatability of these robots. Component capability needed to manufacture

electrical robots includes that of electrical motor, potentiometer, modulators, rectifiers, and

others.

Setting the stage for potential disruption in the industrial robotics industry

While the robots with electrical actuators targeted a product-market that demanded low

load capacity but high repeatability, innovations-- such as increases in AC servomotor power

output in the 1970s and 1980s-- enabled manufacturers to gradually increase the load capacity of

electrical robots. Since the early-1970s, significant innovations enhanced the capabilities of

brushless AC motors [26]. Yet another significant technological innovation that greatly enhanced

the suitability of electric motors for small-parts assembly jobs is the development of the Direct-

Drive robots. Originally developed by the Robotics Institute of the Carnegie-Mellon University

in 1980, these robots eliminated the use of gear-reducers in the robots. As a result of this change,

the repeatability of the robots could be enhanced significantly.

By the mid-1990s, the robots with electrical actuators had made in-roads into the

traditional hydraulically actuated robot product-markets. However, the robots used for moving

and assembly of the heaviest parts used in automobile and other product manufacturing, which

were 1000lbs or more in weight, were still the domain of hydraulic robots. Hence, the hydraulic

robot manufacturers faced a potentially disruptive threat from robots with electrical actuators

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from mid-1970s till about mid-1990s, the time period of this study. Thus, this industry is well

suited for an investigation of the established notion that large firms do not respond to potentially

disruptive threats. Some of the major milestones in the evolution of the industrial robotics

industry are as follows:

1961: First robot sold by Unimation to GM

1970: US robot population reaches 200.

Early-1970s: Hydraulic robot market begins to grow

1974: First electrical robot is manufactured by ASEA

1977: Unimation starts manufacturing PUMA electrical robots

1979: Prab acquires Versatran division of American Machine and Foundry.

1980: World robot population crosses 20,000.

1980-1983: Electrical robot market begins to grow. Cincinnati Milacron, Fujitsu-Fanuc,

Mitsubishi Heavy Industries, and Kawasaki heavy Industries started

manufacturing electrical robot

Mid-1980s: All major robot manufacturers offer electrical robots, except Prab. ABB

acquires Trallfa, a hydraulic spray-painting robot manufacturer.

1988: ABB introduces first electric spray-painting robot, a traditional market of

hydraulic robots.

In Table 1 below, we summarize the evolution of various technologies and product-

markets involved in the industrial robotics industry.

Insert Table 1 about here

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Mapping the changes in the industrial robotics industry to potential disruption: Next we

investigate if changes in the industrial robotics industry, since the late-1970s, satisfy most of the

characteristics of a potentially disruptive change as described in the literature [11], [27].

i) Disruptive products initially underperform the mainstream products in the critical

performance feature that the mainstream customers demand: Figure 2 shows the maximum load

capacity of the robots introduced over the years. Hydraulic robots by Prab have been the

historical leaders in the load capacity, followed by the hydraulic robots of Unimation. The four

leaders in load capacity during the 1970s were Prab, Unimation, Cincinnati Milacron, and

Kawasaki- all manufacturers of hydraulic robots at that time. However, by the 1990s, electrical

robot manufacturers were catching up with the load capacities offered by the hydraulic robots.

Insert Figure 2 about here

ii) Mainstream customers do not value the new performance feature provided by the

potentially disruptive product: Consistent with Christensen’s notion of disruption, the new

performance feature (repeatability) offered by the electrical robots was not highly valued by the

mainstream users, such as the automobile manufacturers.

iii) Disruptive products are typically cheaper than the mainstream products: Again

consistent with Christensen’s notion, the electric robots were cheaper than the hydraulic robots.

In the early 1980s, the electrical robots for small-parts assembly would typically cost around

$20,000 and the hydraulic robots for traditional jobs would cost around $60,000.

iv) Over time, the performance of the disruptive products improves and satisfies the

demand of the mainstream customers: By the mid-1980s, increases in the AC servomotors power

output enabled many of the electrical robot manufacturers to increase the load capacity of their

electrical robots. By the early 1990s, the electrical robots by ABB had surpassed the highest load

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capacity of many of the hydraulic robots. The reverse—whereby the hydraulic robots could

improve their repeatability and target the product-market that valued electrical robots—did not

happen.

Consistent with Bower and Christensen’s observation that potentially disruptive

technologies initially “tend to be used and valued only in new markets or new applications” [6;

p.5], robots with electrical actuators were initially used in a new product-markets, such as the

small-parts assembly plants, and by the early 1990s, these robots were gradually making in-roads

in the product-markets that traditionally used robots with hydraulic-actuators.

The preceding discussion makes it clear that the manufacturers of robots with hydraulic

actuators faced a potentially disruptive threat from the robots with electrical actuators.

Response of large robot manufacturers to potential disruption:

To investigate the response of robot manufacturers to potential disruption, we

concentrated on the largest robot manufacturers in the U.S., Europe, and Japan like Unimation,

Prab, Cincinnati Milacron, Asea (now ABB), Kawasaki Heavy Industries, Fuji Electric, Fanuc,

Hitachi, Mitsubishi Heavy Industries, and Matsushita. This is consistent with most of the extant

research on disruption (e.g., [1]), which theorizes on large manufacturers only. During the late

1970s, the combined market-share of these manufacturers was more than 50% in their respective

home markets. In the U.S. in 1980, Cincinnati Milacron, Unimation, and Prab had almost 70% of

the total market. Figure 3 shows the corporate sales and robot sales of these manufacturers in the

early 1980s. This figure also shows that, as compared to the US manufacturers, the Japanese

manufacturers were bigger and more diversified. Next, we briefly describe the products

manufactured by these firms till the mid-1980s.

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Unimation: Started in 1958 by the pioneer of industrial robotics, Joe Engelberger, Unimation

sold the first robot in 1961 to GM. Unimation’s robots had hydraulic actuators and were used in

spot welding. By the early 1980s, Unimation’s hydraulic robots could lift 450 lbs of load. It

started manufacturing electrical PUMA robots in 1977 when it took over Vicarm Inc. While high

on repeatability, the maximum load capacity of the PUMA robots was about 22 lbs in the early

1980s. In 1983, Unimation was the largest robot manufacturer in the US with about 50% market

share (by value). Unimation was taken over by Westinghouse in 1984, which in turn, sold the

direct-drive robot unit as Adept Technologies in 1984, licensed the hydraulic robot business to

Prab in 1987 and sold the rest of the electric robot business to a Swiss robot distributor, Staubli,

in 1988.

Cincinnati Milacron: A major producer of machine tools since the late 1800s, it started robot

R&D in 1969 and produced the first robot in 1974. It manufactured only hydraulic robots in the

1970s and started manufacturing electric robots in 1982. The firm had developed the capability

to manufacture both the hydraulic and electrical robots through in-house R&D [33; p.160]. In the

early 1980s, it was ranked second in market share in the US (by value). In 1990, Cincinnati

Milacron sold its robot business to ABB.

Prab Conveyors: Started manufacturing robots with hydraulic actuators for machine tool

loading and unloading in 1968. By the early 1980s, robot sales exceeded conveyor belt sales and

the typical Prab robot could lift 125 lbs of load. Prab robots were simple “pick and place” ones

and it was the only large US robot manufacturer that did not manufacture electrical robots.

Originally a manufacturer of conveyors, Prab started manufacturing robots when it

wanted to make something similar to Unimation’s robots “for half the price that will do the job”

(Prab President jack Wallace quoted in Inc., June, 1, 1982). Prab’s motto was-- "Prab Robots Inc.

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keeps it simple" and its robots were uncomplicated ones, which were sold to small users. Unlike

Unimation and Cincinnati Milacron, which "devoted most of their time to going after the

automotive spot-welding lines; we've devoted our time to going after the one-here, two-there

applications. Our biggest user doesn't have more than 20 machines" (Prab Vice-President Walt

Weisel quoted in Inc., June 1, 1982). Thus, Prab was not dependent on one or two large buyers.

Prab acquired Versatran-- the robot manufacturing division of American Machine and

Foundry Corporation—in 1979. Versatran also manufactured hydraulic robots.

ASEA (later ABB): Swedish electronics company that pioneered electrical robots and produced

the first all-electric robot in 1974. As with any new potentially disruptive product, this new

robot, IRB-6, had a load capacity of 13.2 lbs. This was considerably inferior to the rated load

capacity of 99 lbs of MKII Series 4000 hydraulic robots by Unimation available since 1972. Also

in 1972, Prab’s Third Generation hydraulic robots had achieved a load capacity of 55 lbs. ABB

acquired the Norwegian company Trallfa, the pioneer of hydraulic spray-painting robots, in

1985. Spray painting robots, which rely on high load capacity robots, had traditionally been the

strongholds of hydraulic robots. However, innovations in the electric motor technology enabled

ABB to manufacture the first electric spray-painting robots in 1988

Fujitsu-Fanuc: Started as the computer-manufacturing unit of Fujitsu in 1956, it specialized in

manufacturing electrical motors. It became an independent company in 1972 and had almost

70% global market share in machine-control systems. It manufactured the first robot in 1975.

Although initially it manufactured only hydraulic robots, it started manufacturing electrical

robots soon after entering the industry (Industrial Robot, Dec., 1981, p.216). In 1983, it entered

into a strategic alliance with General Motors and instantaneously gained about 60% of the US

robot market-share.

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Hitachi: Was established as a motor and transformer manufacturer in 1910. It manufactured

railroad cars, medical equipments, television components and other products, and manufactured

both hydraulic and electrical robots since the late 1970s. Since the mid-1980s, it manufactured

only electrical robots.

Kawasaki Heavy Industries: The pioneer of the Japanese robotics industry and the biggest

market-share holder (by value) in Japan in the early 1980s. It manufactured only hydraulic robots

in the 1970s in technical collaboration with Unimation. Toyota was one of its major customers.

Started manufacturing electrical robots in 1981 (Industrial Robot, Dec. 1981; p.221). It is one of

the largest manufacturing firms in Japan and was established as a ship-builder in 1878. It started

manufacturing steam-locomotives in 1911, aircrafts in 1922, trucks in 1933, helicopters in 1952,

and robots and motorcycles in 1969. Kawasaki terminated its contract with Unimation in 1985

and entered into a new contract with Adept to manufacture direct-drive electrical robots. By the

mid-1980s, Kawasaki’s electrical robots achieved better repeatability than those of ABB robots.

By the early 1990s, Kawasaki’s portfolio of industrial robots comprised of only electrical robots.

Mitsubishi Heavy Industries: Formed in 1884 as a ship-builder. Similar to Kawasaki, it

diversified into automobile manufacturing in the mid-1920s. It began producing hydraulic robots

in 1975 and manufactured material handling and spot welding robots. It started manufacturing

electrical robots in 1983.

Fuji Electric: Established in 1923 as a joint venture with Siemens, it manufactured electrical

instruments, fans, and motors. Started manufacturing electrical robots in the mid-1970s.

Matsushita: Formed in 1918 as electrical socket manufacturer, it started manufacturing lamps

and radios in the 1930s. Started manufacturing robots in the mid-1970s and sold the first

electrical robot in 1980.

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Technological capabilities of large robot manufacturers

Pre-existing component capability of large manufacturers: To track the pre-existing

component capability of large manufacturers, we explored the number of electrical control

system patents that each of the large manufacturers held in the U.S. during the period 1970-1985.

Katila and Ahuja's [24] study on the industrial robotics industry points out that the more

knowledgeable firms are able to search deeper and introduce more products. Accordingly, we

assume that if a firm was assigned a patent in electrical systems, then it possessed the capability

required to manufacture components like electrical motor, potentiometer, modulators, and

rectifiers, which are used in manufacturing robots with electrical actuators. Since robots are not

classified as a separate product or technology category, we calculated the number of patents that

were issued to a firm in a given year that could be applied in manufacturing electrical robots. We

used keywords such as “robot,” “electrical,” “motor,” and “actuator” to identify robot-related

patents in the www.uspto.gov database. Figure 4 shows that the Japanese manufacturers like

Hitachi and Matsushita held more than 400 electrical robot related patents during 1970-1985, but

Unimation and Prab held less than 10 patents each during that period. Thus, Unimation and Prab

had the lowest component capability as compared to other manufacturers.

Architectural capability of large manufacturers: The increasing demand from the

electronics industry during the 1980s meant that the robot manufactures had to link the

components used in robot manufacturing and design the product architecture in a way so as to

reduce the downtime for maintenance for small-parts assemblers. Among other things, this

implies that robot manufacturers had to utilize their architectural or combinative capability to

link the components and subsystems in ways to reduce friction among the components,

effectively dissipate the heat generated by the operation of the system, and to “generate new

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applications from existing knowledge” [20; p.391]. From an engineering viewpoint, firms

acquire architectural capability by manufacturing different products in which the components

and subsystems are linked in different ways. Capability to link the components and subsystems

in a variety of ways helps firms to create new products and also creates the absorptive capacity to

realize the linkages among the components in robots with different actuators. Hence the product-

line breadth [28] of firms should indicate their architectural capability. The more the product line

breadth of a firm, the more likely it is that the firm can utilize its existing architectural capability

in manufacturing new robots, including electrical robots. Hence, we explore the product-line

breadth of the robot manufacturers as a measure of their architectural capability. From the annual

reports and various other secondary sources, we measured the number of different products that a

manufacturer offered in 1980, when the world robot population crossed 20,000 for the first time.

Industry experts consider 1980 as the beginning of the electrical robot era in the US. The

population of electrical robots reached about 2.1% of total US robot population in 1980, and this

figure increased to almost 15% by the mid-1980s.

Various trade magazines regularly carried articles about robot manufacturers. These

articles described the history of the firms and the products manufactured by them. For example,

Industrial Robot (Dec. 1981, p.216) described in details the capabilities of Fanuc, and September

1980 issue (p.160) of the same magazine described the capabilities of Cincinnati Milacron. For

our operationalization, since Unimation manufactured only robots in 1980, we gave its product-

line breadth a value of ‘1’. Hitachi, manufactured several different types of products, like

household equipments, robots, machine tools, and so on, and its product-line breadth was ‘15’.

Figure 5 documents the product-line breadth of various manufacturers. It is evident that Hitachi,

21

Matsushita, Mitsubishi, and some other manufacturers had a higher value of product line breadth

than either Unimation or Prab.

Pre-existing technological capability and their response to potentially disruptive

change: As shown in Figure 6, which is a combination of Figures 4 and 5, the largest robot

manufacturers were heterogeneous in terms of their pre-existing capabilities. Firms like

Matsushita, ABB, and Hitachi were better positioned, in terms of technological capabilities, to

respond to the change since these firms had more component and architectural capabilities than

others. For these firms, the advent of electrical robot was competency-enhancing change.

Moreover, all the large firms had introduced electrical robots, except Prab. As shown in Figure 6,

Prab had the least pre-existing technological capability that was relevant for electrical robots-

i.e., the advent of electrical robot was the most competency destroying for Prab.

Insert figures 3, 4, 5, and 6 about here

Divergence of our findings from theory’s predictions: Our findings diverged from the

predictions of Christensen’s notion of disruption in the following ways:

i) We find evidence that all large hydraulic robot manufacturers, except Prab, introduced

new products with the potentially disruptive technology relatively early, i.e., by 1983. This was

about three years after the demand of electrical robots from assembly and electrical and

electronics industries reached $10 million [36; p.346]. Contrary to the theoretical predictions

(e.g., [6]), Unimation, which had more than 50% of the US robot market share since the 1970s,

was one of the early movers to start manufacturing electrical robots.

ii) Unimation’s sales were mostly to large buyers like GM and Ford. Hence, according to

Christensen’s theory, Unimation would face the innovator’s dilemma and not respond to a

22

potentially disruptive threat if the new technology does not benefit its existing large buyers.

Despite this, Unimation was one of the early movers in the electrical robot market.

iii) Unlike Christensen’s notion that large manufacturers cannot effectively transition to

the new product-market (see e.g., [6; p.44], “However, these same companies are rarely in the

forefront of commercializing new technologies that don’t initially meet the needs of mainstream

customers and appeal only to small or emerging markets”), repeatability of Unimation’s

electrical robots approached that of Matsushita in the mid-1980s. Similarly, repeatability of

Kawasaki robots approached those of ABB’s robots by the mid-1980s.

iv) In addition to Unimation, Cincinnati Milacron, the second largest US market

shareholder, was also one of the early movers to enter the market for electrical robots.

v) Kawasaki, the largest market shareholder in Japan not only adopted electrical robots,

but also stopped manufacturing hydraulic robots in the mid-1980s. Mitsubishi and Kawasaki—

two of the largest Japanese manufacturers-- successfully switched from being hydraulic robot

manufacturers to electrical robot manufacturers. In fact, Industrial Robots International

(4/11/1983, p.2) reported that all major hydraulic robot manufacturers of Japan were introducing

electrical robots in the early 1980s.

vi) Although only one of the large robot manufacturers, Prab, seems to have conformed

to Christensen’s [1] notion of “disruption,” a deeper analysis suggests that even Prab’s example

contradicts Christensen’s theory. Prab had a number of smaller buyers and hence, according to

the existing theory, it should be less dependent on large buyers—and consequently less inertial--

as compared to Unimation, whose sales were concentrated to large buyers like GM and Ford.

Prab, however, contrary to the predictions, never introduced electrical robots.

23

vii) To introduce the potentially disruptive products, firms either relied on their pre-

existing capabilities or relied on mergers and acquisitions. Unimation developed the capabilities

to manufacture electrical robots by acquiring Vicarm Inc. in the late-1970s. Kawasaki developed

this capability by both inhouse and by licensing the electrical robot technology from Adept (the

Vicarm division of Unimation). Cincinnati Milacron developed the capabilities inhouse. All the

firms, except Prab, were committed to electrical robots. Many of these firms stopped

manufacturing hydraulic robots by the mid-1980s.

To summarize our findings, the causal mechanism for not introducing new products by

large firms, during disruption, seems to be more nuanced than what theory predicts. Inertia,

induced by the value systems and processes of large firms, who depend on large mainstream

buyers, did not prevent Unimation, Cincinnati Milacron and Kawasaki from successfully

responding to the potentially disruptive change. The only difference between these firms and

Prab seems to be that Prab possessed the least technological capabilities required to meet the

change. Thus, as suggested by Henderson [10], and as we had posited in the hypothesis, the

boundary condition for large firm inertia to potentially disruptive change seems to be a

competency destroying change, and not because the manufacturers listened to their large buyers,

as theory predicts.

Further refining of the boundary conditions: Although our result indicates that the

pre-existing capabilities constitute a boundary condition for market leaders’ response to a

potentially disruptive change, Table 2 illustrates that our findings in the robotics industry differ

from those of prior research in another interesting way. Prior research [5], [6] reports that firms

such as IBM and DEC had the ability (a search at the USPTO website reveals that IBM and DEC

were granted 7000+ and 148 patents respectively between 1970 and 1985) needed to respond to

24

the advent of personal computers, but did not introduce PCs—a disruptive innovation for

minicomputer manufacturers. In contrast, our findings suggest that some large hydraulic robot

manufacturers, such as Unimation and Cincinnati Milacron, either acquired the capabilities

through acquisition or built those capabilities inhouse, to respond to the threat. Thus, our results

seem to point to an anomaly in the theory and leads to yet unanswered question-- “Why did the

behavior of the large hydraulic robot manufacturers diverge from that of the large disk-drive or

computer manufacturers?” Before seeking some possible explanations to this question, we

wanted to ascertain that our findings indeed point to an anomaly in the theory.

Insert Table 2 about here

Christensen [4; p.45] noted that “True anomalies to the model would be where…….an

incumbent successfully builds an industry-leading business in a disruptive innovation by

developing and commercializing the disruption within the same business unit that is also

responsible for sustaining the profitable growth of he original, healthy, core business” (italics

added). Prior to extending the disruption theory, it is appropriate that we address the key words

and phrases in Christensen’s statement to ascertain that our finding is indeed an anomaly. First,

Cincinnati-Milacron, Unimation, and most of the other large manufacturers had maintained their

industry-leadership in the US and global industrial robotics market, till the mid-1980s when GM

became a producer of robotics. Second, within most of the large firms, both the electrical and

hydraulic robots were manufactured within the same division, typically the Robotics Division.

Third, although we are constrained by the lack of financial data on the profitability of the

robotics divisions of any firm, anecdotal evidences suggest that the robot business units of large

manufacturers were profitable in the late-1970s. Unimation, Cincinnati Milacron, Prab, and

ASEA had 44.4%, 32.2%, 6.1% and 2.8% share of the US robotics market, respectively, in 1980,

25

in dollar terms [31]. Since, several researchers have observed that market share is positively

correlated to profitability (see e.g., [30]), we can reasonably assume that these firms were

profitable in their robotics business. Additionally, there are anecdotal evidences to suggest

Unimation had been profitable since 1975 [32, p.273]. Thus, our paper very likely points to an

anomaly in the theory.

Next, we try to answer the question, “What might explain why the market leaders in

hydraulic robots-- Unimation, Kawasaki, and Cincinnati Milacron—introduced new products by

developing new capabilities to meet the challenge of potential disruption, but market leaders in

disk-drive industry (e.g., Seagate [6; p.48]), despite possessing relevant capabilities, did not?”

The hint of a possible explanation of the anomaly can be found in Christensen and Overdorf [5;

p.5], where they explain how the value systems of large corporations dictate if they introduce

new products with the disruptive technology. [4] posits that large firms evaluate new

opportunities in terms of a) the acceptable gross margins and b) the expected market-size of the

new market to make it interesting, where both “acceptable” and “interesting” are relative to the

existing, i.e., the sustaining market. One critical assumption in the above explanation is that the

emerging new market for products with disruptive innovation is more uncertain both in terms of

the its expected market size and profitability, as compared to the market for products with

sustaining innovation. We find evidences of this assumption when [6; p.47] notes that it is “often

difficult to project how big the market (new) technology will be over time” and “profit margins

are alluringly high for sustaining innovations.” However, this raises the follow-up questions--

“will large firms introduce new products with only sustaining innovation if the existing market’s

size and profitability are uncertain?” and “did the large manufacturers of hydraulic robot

26

introduce electrical robots fairly early because the expected market size and profitability of the

sustaining market was uncertain?”

We studied the history of the industry to look for answers to these questions. Although

we did not find evidence if the actual profitability of the hydraulic robots lived up to the

expectations of the manufacturers, we found evidences to suggest that the actual market size of

the hydraulic robot was much smaller than what the manufacturers had expected. By the late-

1970s, several prior market research studies that had consistently overestimated the potential

marker size for the hydraulic robots. For example, Arthur D. Little, Inc. had predicted a market

size of 5000 robots by 1972, but the actual market size was around 500 robots [34]. Additionally,

the Frost and Sullivan Survey of 1974 had predicted that robots with vision sensors would be

replacing assembly line workers by 1980. However, by the late 1970s, it was apparent to the

robot manufacturers that technological progress in vision sensors would take several more years,

if not decades, to replace human workers. Moreover, the Frost and Sullivan survey had also

predicted a robot population of 170,000 by 1985 in the US, but the actual US population of

robots was around 20,000 in that year [35]. The Time magazine reported (Limping Along in

Robot Land; July 13, 1987), that, in contrast to analysts’ expectation of about 250,000 robots in

American factories in 1987, the actual figure was about 25,000. Finally, it was clear by the late-

1970s that the total market size for hydraulic robots would be relatively small (see e.g.,

Carnegie-Mellon University Robotics Survey, 1981; The Industrial Robots- A Delphi Forecast of

Markets and Technology, published by the Society of Manufacturing Engineers in 1982 and

1985). All these evidences suggest that the sales revenues from sustaining innovations were

likely below-expectation and the manufacturers were likely uncertain if the future sales revenue

would meet their expectations. In contrast, the disk-drive manufacturers were relatively certain

27

of large revenues from sustaining innovation. For example, [6, p.48] notes that Seagate expected

$300 million in revenues from a sustaining innovation in the 5.25-inch disk drive. The robot

manufacturers, however, had a more intuitive and optimistic expectation for the electrical robot

market. For example, in 1978, General Motors observed that 90% of all the components handled

in manufacturing a car weighed five pounds or less. International Federation of Robotics cites

this as one of the factors that convinced Unimation to invest its resources in Vicarm Inc. to

develop the PUMA electrical robots (www.ifr.org/history accessed August 2012). The growth in

the demand of electrical robots in Japan in the 1970s, especially from the small electrical and

electronic component manufacturers [23], had likely convinced the robot manufacturers that the

potential market size for electrical robots was “acceptable.” The Society of Manufacturing

Engineers’ Delphi Forecast of Markets and Technology (1982; p. 20) predicted that electrical

robots with repeatability of 0.001 inch, or better, would be 40% of all robots sold in 1990, up

from 16% in 1980. In contrast to the relatively positive outlook for electrical robots, [6] hints

that the expected profitability from the disruptive innovation in disk drives was more relatively

uncertain (e.g., “According to their analysis, the 3.5-inch drive would never be competitive with

the 5.25-inch architecture” [6; p.48]).

Thus, our analyses suggests that, even if an innovation is potentially disruptive according

to the conditions suggested by [11] and [27], if the market size for products made with the

sustaining technology is uncertain, only the firms with the least amount of relevant pre-existing

technological capabilities are unlikely to introduce new products made with the disruptive

technology. Unlike the theory’s predictions, we do not find evidence that access to large buyers

is a source of inertia when firms introduce products with the potentially disruptive technology.

28

Thus, the pre-existing capabilities of large market-share holders and certainty of demand for

products made with the sustaining technology define the boundary conditions of the theory.

Discussion

Our research points out that the boundary conditions for the theory of disruption are more

nuanced than what prior research has predicted. We started by asking the question, “under what

conditions does a large firm responds to the potentially disruptive change by introducing new

products with a new technology?” In the context of the robotics industry, we observed that

despite electrical robot being potentially disruptive, both Unimation and Cincinnati Milacron, the

two largest hydraulic robot manufacturers, had developed the capability needed to manufacture

those robots. Prab, on the other hand, despite having the value systems that Christensen argues as

conducive to introducing products with the disruptive technology, had not developed the required

capability. In the process we extend the theory of disruption by suggesting that the pre-existing

capabilities of large market-share holders and certainty of demand for products made with the

sustaining technology define the boundary conditions of the theory.

Although our findings are inconsistent with those of Christensen’s, the departure of our

findings from those suggested by Christensen, however, opens up new opportunities for research.

Future research can explore the industry-specific and technology-specific factors that may lead to

different firm responses during disruption. The threshold of uncertainty in the markets for

products made with sustaining technology, beyond which a large manufacturer may introduce

new products made with the disruptive technology, is another likely avenue for future research.

A comparison of Unimation and Cincinnati Milacron suggests that large market-share holders

pursue different strategies to develop the capabilities needed to manufacture the new products,

while facing the threat of a potentially disruptive technology.

29

The paper suffers from several drawbacks. First, in addition to technological capabilities,

a firm possesses several other types of capabilities and routines, like the complementary

capabilities and marketing capabilities, and we do not take those into account for our analyses.

Second, the paper does not address several other possible explanations that might explain the

divergent behavior of market leaders in hydraulic robots and hard disk drives. For example,

hydraulic robots were largely used by a handful of large industrial firms like automobile

manufacturers. These manufacturers make “lumpy” purchases, i.e., they typically buy millions of

dollars of robots and they do so only once in many years. [29] noted that lumpy purchases

exacerbate competition. Since the buying pattern of hard-disk drive users was less lumpy, rivalry

may have been less intense, and hence the responses of disk-drive manufacturers may have been

different from those of robot manufacturers. Third, future research needs to explore if our results

hold for other types of firm responses, such as hiring new R&D personnel with knowledge in the

new technology. Fourth, we do not consider some alternative explanations, such as the role of

Robotics Industries Association in the US, which may have provided critical information about

market trends to Unimation and Cincinnati Milacron, and thereby helped them to develop the

capabilities required to manufacture the potentially disruptive products. Similarly, networks

among other manufacturers, such as Unimation and Kawasaki, where the latter had licensed the

technology of the former, may have prompted firms such as Kawasaki to adopt the technology

for manufacturing electrical robots. Future research needs to systematically investigate the role

of networks among manufacturers during potential disruption. Finally, we do not consider the

alternative explanation that whether a firm responds to a disruptive threat or not depends on the

cognitive capabilities of the senior managers. Future research needs to investigate how Joe

30

Engelberger, the founder of Unimation, and Peter Ruppe and Allen Bodycomb of Prab, helped

shape the strategies of their firms during a potentially disruptive threat.

Despite these limitations, this paper extends the literature and implies that the causal

mechanism of “disruption” is more nuanced than what literature suggests.

Figure 1: Proportions of robots of various applications in the domestic shipments of robots in the U.S. by year (Machine tending= Machine tool loading and unloading robots) (Source: USITC Pub. 1475, Dec. 1983)

Figure 2: Improvement of maximum load capacity of hydraulic and electric robots (in lbs)

Figure 3: Sales of major robot manufacturers (in $ MM, in the early 1980s) (Sources: Annual

Reports)

0

10

20

30

40

50

60

1979 1980 1981 1982 1983 (Est.)

Perc

ent

Welding Robots

Assembly Robots

Machine tending

1

10

100

1000

10000

Mid-1970s Late 1970s Early 1980s Mid 1980s Early 1990s Mid 1990s

Maximum load capacity of hydraulic robot Maximum load capacity of electric robot

1 10

100 1000

10000

Unimation Cincinnati Milacron

Prab ASEA Kawasaki Fanuc Fuji Electric

Matsushita Mitsubishi Heavy

Corporate sales

Robot sales

31

Figure 4: Electrical control systems patents assigned to Robot manufacturers during 1970-1985

Figure 5: Product line breadth of robot manufacturers in 1980

1

10

100

1000 Pa

tent

s

0

2

4

6

8

10

12

14

16

18

No.

of

prod

ucts

32

Figure 6: Combination of Figure 4 and 5

33

Table 2: Comparison of our findings to those in extant literature (Firms mentioned in [5] and [6] in italics; Relatively low-extent of pre-existing capability= <100 patents and <9 products based on Figure 6)

Introduces new products with potentially disruptive

technology fairly early

Does not introduce new products with the potentially disruptive technology (or are

late in introducing those products) Possesses relevant pre-existing capability to a relatively high extent

ASEA; Fuji; Matsushita; Fanuc; Hitachi; Mitsubishi

Digital Equipment Corp.; IBM

Possesses relevant pre-existing capability to a relatively low extent

Kawasaki; Unimation

Cincinnati Milacron

Prab

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