Why Companies Looking For New Technologies Don't Manage To Innovate

Forbes

12-05-2025

Research shows tech outsourcing doesn't always push large firms to find novel solutions.
In today's hyper-competitive business landscape, where technological change is constant and disruption looms large, company leaders often look outside their organizations for innovation. Big firms work with smaller start-ups to use their cutting-edge technologies in order to develop and introduce new products into the market. This phenomenon is referred to as 'technological sourcing,' and it's a win-win situation: The large company adds valuable new technologies that can improve its innovative and financial performance, while the small company gains access to funds and larger distribution networks.
Managers often emphasize that tapping into external technologies is particularly valuable and, in some cases, acknowledge that new solutions are hard to come by within their large organizations. As former CEO Chris Viehbacher said regarding Sanofi's own internal R&D capabilities: 'There has to be some element of disruptive thinking to have innovation and I can tell you that big companies do everything to avoid any new thinking in their companies.'
This leads to the question: Does external technology sourcing by large firms really add novel solutions to their technological repertoire?
In our research published in the Strategic Management Journal, my co-authors and I found that, contrary to what some managers may believe, technology sourcing doesn't necessarily push large firms to pursue novel solutions. The reason? These decisions are guided by internal R&D teams, who are tasked with evaluating external technologies, and they tend to favor options that align with their existing knowledge, instead of branching outside of their comfort zone. Whether it's due to cognitive bias or established routines, the result is that, more often than not, large firms end up in-sourcing familiar solutions instead of adopting new, groundbreaking technologies.
Ultimately, this leads to a disconnect between what managers claim they want to do (seek disruptive, novel solutions) and what they select in technology sourcing. And it can be a problem for companies wanting to enhance innovation through external collaborations.
Why companies choose the familiar
While this phenomenon can apply to many highly technological industries, my co-authors and I looked at biopharmaceutical companies between the years 1995 and 2015, a period of prominent collaboration between established firms and specialized firms working at the technology frontier. The narrative coming from the large firm CEOs at the time was to go beyond external boundaries and seek highly novel technologies.
But after analyzing in-sourcing events like licensing, alliance agreements and acquisitions, we found that there was a clear preference for familiar solutions to problems. It's not that R&D teams weren't able to find the novel, core-shaking ideas top management pushed for; it's just that when it came time to decide where to allocate their money, they chose technologies similar to what they had already worked with.
In a way, it's the human condition: better to deal with what you know. But, for companies, it can lead to inertia or failure to adapt to changing markets. (Think of VHS tapes' sudden irrelevance with the rise of DVD players, or typewriter companies' dwindling market when computers became more affordable.)
Not every firm we looked at pursued the familiar all the time, however. Companies that had previously gone through unexpected failures – for example, unsuccessful drug trials – were more likely to get creative when searching for tech solutions outside their companies. That's because such an experience pushed the company to reassess the approach it was taking, as well as its judgement on where to allocate funds and resources. This, in turn, made them more open to novel tech solutions.
The benefits of branching out
We found that when top managers pay attention to specific problems (in our case, therapeutic disease areas like oncology or neurology), it can be an impetus for the R&D personnel to consider a broader range of technologies and select more novel solutions that the firm has not yet tried.
It's crucial that mangers be aware their narrative and goals may not always be in sync with the firm's ultimate actions when it comes to seeking out novel technologies. However, we know that in a fast-changing world, the exploration of groundbreaking solutions (especially those with which a firm is not yet familiar) can have highly beneficial results. For biopharmaceutical companies, for example, monoclonal antibodies was a novel biotechnology that led to the creation of some of the most commercially successful drugs.
Similarly, in the tech sector, companies like Apple and Google have famously embraced external ideas – from acquiring Siri to buying Android – and succeeded because they could integrate these technologies into a coherent, novel offering. Netflix is also an example, moving from DVD rentals to online streaming.
So what can managers do to ensure their companies don't default to familiar technologies? First, managers can embrace opportunities that emerge from failures, as those may enable firms to become more receptive to novel solutions. It's also important for top managers to be more involved in the process in general. Simply establishing a unit to explore cutting-edge technologies or setting a mandate to seek novel solutions is not enough, as our research shows. Of course, attention and time are two things managers often lack, so that can be tricky to navigate.
Ultimately, it's important for top management to keep in mind the influence they have on R&D teams, and the role they play in actively counteracting biases. It all starts with being aware of how their narrative and their 'quest for novelty' aligns with the actions the company takes when sourcing external technologies.
By Thomas Klueter, professor of Entrepreneurship and Analysis of Business Problems at IESE Business School.