Managing choice in a disruptive technology

Using results from our study of firms commercializing MEMS-based products, we look at the efficacy of using a real options perspective to manage risk in the area of a disruptive technology. Finns working in an area of disruptive technology, such as Micro Electro-Mechanical Systems (MEMS), are now regularly making choices on projects which focus on discontinuous innovations. Often a discontinuous or radical innovation represents the destruction of traditional core competencies for the sake of new core competencies. These new competencies may have not existed at all, or may have existed only in other marketplaces. In our study of firms commercializing MEMS-based products, we found that most firms had MEMS, products based both inside and outside their core competence. A core competence strategic perspective would have suggested that firms should approach MEMS production from its strengths, producing products mostly by expanding upon their core competence. One possible explanation of this departure from the expected is that these firms, in their dedicated commitment to pursue production of MEMS-based products, were diversifying, therefore creating a ´MEMS-portfolio´ as a means of risk management. The risks in this new arena are speculative in nature, making unreliable the traditional probability-based tools using historical data