Exploration Across Incompatible Technologies: How Firms Organize Flexibility for Innovation

ABSTRACT Firms often face multiple emerging technologies that evolve in parallel yet share limited architectural compatibility. In such settings, firms may concentrate innovation on one trajectory or pursue flexibility by maintaining engagement across multiple trajectories. We theorize that flexibility can improve innovation performance, but that these benefits depend on organizational structures that facilitate deep, trajectory‐specific learning and effective coordination. We argue that focused subsidiaries enable deep expertise within individual technologies, external collaborations provide access to complementary expertise beyond firm boundaries, and organizational modularity reduces the coordination burdens associated with pursuing multiple trajectories. Using 40‐year longitudinal data from the flat‐panel display industry, we find that the benefits of a flexibility strategy for innovation performance are substantially greater when firms have more focused subsidiaries, engage in more external collaboration, or exhibit higher organizational modularity. These findings are consistent across three complementary dimensions of innovation performance: patent impact, patent monetary value, and new product introductions. When these organizational arrangements are limited, the relationship between flexibility and innovation performance is substantially weaker. Our study demonstrates how organizational design enables firms to realize the innovation benefits of flexibility across architecturally incompatible technological trajectories.