The Occurrence and Origin of Time-based Pacing: Generational Product Innovation in the Software Industry

This study uses the lens of organizational routines to examine the phenomena of timebased pacing in generational product innovation within the applications software industry. We first test for the presence of time-based pacing in a large sample of software businesses. We then investigate internal and external contingencies that affect the strength of time-based pacing: firm size, firm experience, and recurring technological and market events in the industry environment. Our core results show that time-based pacing exists in the form of an inverted-U relationship between generational product innovation and time since previous introduction. Time-based pacing is more pronounced in larger firms and, to a lesser extent, more experienced firms, which we take as evidence of the impact of firms’ internal routines. In addition, firms introduce new products in response to external technological and market events, which we take as evidence of limits on the dominance of internal routines. This study uses the lens of organizational routines (Cyert and March, 1963; Nelson and Winter, 1982) to examine the phenomena of time-based pacing (TBP) in generational product innovation (Lawless and Anderson, 1996). Brown and Eisenhardt (1997) defined time-based as a strategy for competing in fast changing, unpredictable markets by scheduling product innovation at regular time intervals. Brown and Eisenhardt (1998) cited Intel’s strategy for product introduction and new plant construction as examples of TBP. New vehicle introduction cycles at Toyota and other auto companies provide a further example. Using complexity theory as a metaphor, Brown and Eisenhardt (1997) suggest several reasons that might cause TBP, including benefits from undertaking efficient transitions between product generations, the presence of rhythms of activity that perpetuate themselves within firms, and firm responses to external patterns of events. More generally Brown and Eisenhardt (1997) contrasted TBP with traditional theories of organizational change. Building on earlier work by Bourgeois and Eisenhardt (1988), Chakravarthy (1997), D’Aveni (1994), and others, Brown and Eisenhardt offered a provocative vision of organizational change based on TBP of product innovation that contrasts sharply with punctuated equilibrium models (Miller and Friesen, 1984; Tushman and Romanelli, 1985). They noted that “While the punctuated equilibrium model is in the foreground of academic interest, it is in the background of the experience of many firms. Many firms compete by changing continuously” (1997: 1). In contrast to the infrequent radical processes of punctuated equilibrium, Brown and Eisenhardt focused on a very different concept of change: continuous incremental change processes based on time-based pacing of product innovation. These are important insights about business strategy. At the same time, though, Brown and Eisenhardt (1997) offered limited conceptual framing with their demonstration of the existence of TBP within three businesses among an inductive study of six businesses. There are opportunities for deeper conceptual understanding of the sources of TBP, as well as for determining whether TBP exists in larger sample studies. Since the two studies by Brown and Eisenhardt, there have been no large scale tests of the occurrence and character of TBP, although the last sentence of their 1997 paper calls for just such studies: “If these inductive insights survive empirical test, then they will extend our theories beyond a static conception of organizations and the punctuated equilibrium model of change to ... a more realistic description of how many firms actually compete” (1997: 32).