Resource reallocation across successive systemic innovations: How Rolls-Royce shaped the evolution of the turbojet, turboprop, and turbofan

Abstract

Research Summary Despite the importance of resource reallocation in shaping a variety of strategic outcomes, strategy scholars have paid only limited attention to the processes by which firms reallocate their resources across successive systemic innovations. To explore these processes, we conducted an in-depth historical case study on Rolls-Royce's role in three distinct systemic innovations that marked the transition from piston engines to jet engines in the civil aviation industry: the turbojet, the turboprop, and the turbofan. The analysis helps explain how and why Rolls-Royce's central role stemmed from its ability to reallocate existing non-scale free organizational and technical resources. A key finding of this study is the identification of the horizontal transfer of functional modules as a critical process, especially during the incipient phase of a systemic innovation. The analysis also highlights the role that specific organizational arrangements, particularly a firm's integrative capabilities, have in shaping the effectiveness with which resources are reallocated.

Managerial Summary Focusing on resource reallocation is important to understand why some firms effectively reallocate their resources through successive systemic innovations while others cannot, even if they have similar resources and face the same environmental conditions. By delving into the technological aspects of aeroengine development and exploring why Rolls-Royce had the capabilities to successfully integrate key functional modules across various modular levels, we clarify the relationship between technology and organization that underlies resource reallocation—a topic that has received only scant attention in the strategy literature.