Exploring the sources of design innovations: Insights from the computer, communications and audio equipment industries

Whereas business research has focused on the impact of design innovations on market response and financial performance, the sources of design innovations, as opposed to those of technological innovations, have largely escaped investigation. In this research, we examine the organizational, financial, and environmental drivers of design innovations and how they contrast to technological innovations. Our study utilizes a unique dataset encompassing a 10-year window of innovation output drawn from the computer, communications, and audio and video equipment manufacturing industries. Our results suggest that design innovations are driven primarily by investments in research and development and slack organizational resources. Interestingly, we find that design innovations are more prevalent in smaller but fast-growing markets as opposed to technology innovations, which are prevalent in larger markets. Contrary to expectations, we find no association between marketing investments and design innovations. Our research contributes to the extant business literature by considering the sources of design innovations separately from the sources of technology innovations. We also contribute to the literature by distinguishing design and technology patents, developing a deeper understanding of design innovation, and illuminating a lesser understood source of competitive advantage for firms.