Hostname: page-component-78c5997874-4rdpn Total loading time: 0 Render date: 2024-11-15T06:00:58.783Z Has data issue: false hasContentIssue false
  • English
  • Français

Intraorganizational Alignment and Innovation Processes: Philips and Transistor Technology

Published online by Cambridge University Press:  13 December 2011

Mila Davids  and
Geert Verbong
Mila Davids
Affiliation:
MILA DAVIDS is assistant professor and GEERT VERBONG is associate professor in the Department of Technology Management at the TechnicalUniversity in Eindhoven, the Netherlands.
Geert Verbong
Affiliation:
MILA DAVIDS is assistant professor and GEERT VERBONG is associate professor in the Department of Technology Management at the TechnicalUniversity in Eindhoven, the Netherlands.
Get access Rights & Permissions [Opens in a new window]

Abstract

The Dutch company Philips succeeded in producing transistors early on. By the early 1950s, it had acquired a strong position in the European semiconductor market. However, by the end of the 1950s, it was being surpassed by competitors. In response to the developments in solid state electronics, Philips' management adjusted the company's research, development, and production capabilities, enabling the firm to bring point-contact and layer transistors onto the market and to develop its own high-frequency transistor. When demand for industrial transistors increased, Philips was unprepared, leaving it without an entrée to this new market. The company's exclusive contracts with IBM not only failed to produce the expected results; they also limited its ability to establish ties with other computer companies and most important it illustrated Philips' choice not to produce computers. Therefore, Philips did not build knowledge and expertise in the computer field. Philips' organizational structure hampered both its innovative capacity in the field of applications and its ability to adjust transistor requirements to suit customer needs. Thus, by the early 1960s, Philips found itself in a weakened position in the increasingly competitive transistor market.

Type
Articles
Information
Business History Review , Volume 80 , Issue 4 , Winter 2006 , pp. 657 - 688
Copyright
Copyright © The President and Fellows of Harvard College 2006

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 Braun, Ernest and MacDonald, Stuart, Revolution in Miniature: The History and Impact of Semiconductor Electronics Re-explored in an Updated and Revised Second Edition (Cambridge, 1982)Google Scholar; Riordan, Michael and Hoddeson, Lillian, Crystal Fire: The Birth of the Information Age (New York, 1997Google Scholar).

2 The question on the influence of competition policy on the innovative performance raised by, among others, Broadberry and Crafts is less important in the case of Philips and the semiconductor market in the 1950s, because this was still an emergent market without established positions. See Broadberry, Stephen and Crafts, Nicholas, “Competition and Innovation in 1950s Britain,” Business History 43 (Jan. 2001): 97–118CrossRefGoogle Scholar.

3 Galambos, Louis and Sturchio, Jeffrey L., “Pharmaceutical Firms and the Transition to Biotechnology: A Study,” Business History Review 72 (Summer 1998): 250–78CrossRefGoogle Scholar.

4 He also mentions aggressive foreign competition. Chandler, Alfred D. Jr., “The Competitive Performance of U.S. Industrial Enterprises since the Second World War,” Business History Review 69 (Spring 1994): 1–72CrossRefGoogle Scholar.

5 Chesbrough, Henry W., “Environmental Influences upon Firm Entry into New Submarkets: Evidence from the Worldwide Hard Disk Drive Industry Conditionally,” Research Policy 32 (Apr. 2003): 659–78CrossRefGoogle Scholar; van Lente, Harro, Promising Technology: The Dynamics of Expectations in Technological Developments (Delft, 1993Google Scholar).

6 Tripsas, Mary, “Surviving Radical Technological Change through Dynamic Capability: Evidence form the Typesetter Industry,” Industrial and Corporate Change 6 (1997): 341–77CrossRefGoogle Scholar.

7 Braun and MacDonald, Revolution in Miniature; See also Christensen, Clayton M. and Bower, Joseph L., “Customer Power, Strategic Investment, and the Failure of Leading Firms,” Strategic Management Journal 17 (1996): 197–2183.0.CO;2-U>CrossRefGoogle Scholar; Sull, Donald N., “The Dynamics of Standing Still: Firestone Tire & Rubber and the Radial Revolution,” Business History Review 73 (Autumn 1999): 430–64CrossRefGoogle Scholar.

8 Bassett, Ross Knox, To the Digital Age: Research Labs, Start-up Companies, and the Rise ofMOS Technology (Baltimore, 2002), 278Google Scholar. He compares this with Fairchild Semiconductors which had a more short-term horizon. See for Fairchild, and Valley, Silicon Lécuyer, Christophe, Making Silicon Valley: Innovation and the Growth of High Tech, 1930–1970 (Cambridge, Mass., 2006Google Scholar).

9 Sull, “The Dynamics of Standing Still.”

10 Nelson, Richard R. and Winter, Sidney G., An Evolutionary Theory of Economic Change (Cambridge, Mass., 1982Google Scholar).

11 This is partly due to the importance of accumulation of technological know-how over time. Innovation is, as formulated by Jorde, and Teece, , “an incremental and cumulative activity that involves building on what went before, whether it is inside the organization or outside the organization, and whether the knowledge is proprietary or in the public domain.” Jorde, Thomas M. and Teece, David J., Antitrust, Innovation, and Competitiveness (New York, 1992), 72Google Scholar.

New capabilities should therefore be build upon existing expertise and knowledge, even for “competence destroying” innovations that require new technical abilities and make the old obsolete. Nonaka, Ikujiro and Takeuchi, Hiro, The Knowledge-creating Company: How Japanese Companies Create the Dynamics of Innovation (Oxford, 1995Google Scholar). See Smith, K., “Interactions in Knowledge Systems: Foundations, Policy Implications and Empirical,” STI Review 16 (1995): 69–102, esp. 78–81Google Scholar, cited in Oerlemans, Leon A. G., De ingebedde onderneming: Innoveren in industriële netwerken (Tilburg, 1996), 32–3Google Scholar.

12 Christensen, Clayton, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Boston, 1997Google Scholar); See also Christensen and Bower, “Customer Power,” 197–218 and Christensen, Clayton, “The Rigid Disk Drive Industry, 1956–90: A History of Commercial and Technological Turbulence,” Business History Review 67 (Winter 1993): 531–88CrossRefGoogle Scholar.

13 Tripsas, “Surviving Radical Technological Change.”

14 Sull, “The Dynamics of Standing Still"; Tedlow, Richard S., Giants of Enterprise: Seven Business Innovators and the Empires They Built (New York, 2002Google Scholar).

15 Graham, Margaret B. W. and Shuldiner, Alec T., Corning and the Craft of Innovation (Oxford, 2001Google Scholar).

16 Jones, Geoffrey and Kraft, Alison, “Corporate Venturing: The Origins of Unilever's Pregnancy Test,” Business History 46 (Jan. 2004): 100–22CrossRefGoogle Scholar.

17 Baldwin, Carliss Y. and Clark, Kim B., “Capital-Budgeting Systems and Capabilities Investments in U.S. Companies after the Second World War,” Business History Review 68 (Spring 1994): 73–109CrossRefGoogle Scholar.

18 Choi, Hyungsub, “Between Research and Production: Making Transistors at RCA, 1948–1960,” Paper presented at the Business History Conference, Le Creusot, France, 2004Google Scholar.

19 Tilton, John E., International Diffusion of Technology: The Case of Semiconductors (Washington, D.C., 1971Google Scholar).

20 Because Philips used the expression “professional products” we also use this phrase next to “industrial products.”

21 Bassett, To the Digital Age; Braun and MacDonald, Revolution in Miniature; Boersma, Kees, Inventing Structures for Industrial Research: A History of the Philips Nat.Lab., 1914–1946 (Amsterdam, 2002Google Scholar); Graham, Margaret B. W., The Business of Research: RCA and the VideoDisc (London, 1988Google Scholar); Homburg, Ernst, Speuren op de tast: Een historische kijk op industriële en universitaire research (Maastricht, 2003Google Scholar); Hounshell, David A. and Smith, John K., Science and Corporate Strategy: Du Pont R&D, 1902–1980 (Cambridge, 1988Google Scholar); Vries, Marc de, Eighty Years of Research at the Philips Natuurkundig Laboratorium (1914–1994) (Amsterdam, 2005CrossRefGoogle Scholar).

22 Faulkner, Wendy, Senker, Jacqueline, and Velho, Lea, Knowledge Frontiers: Public Sector Research and Industrial Innovation in Biotechnology, Engineering Ceramics, and Parallel Computing (Oxford, 1995), 206CrossRefGoogle Scholar.

23 Although some products were derived from the “light bulb technology,” Anton Philips–who was more commercially interested than his brother Gerard–also had a good feeling for profitable products. Blanken, Ivo J., De ontwikkeling van de N.V. Philips' Gloeilampenfabrieken tot Elektrotechnisch Concern (Leiden, 1992) 310–13Google Scholar.

24 Blanken, De ontwikkeling, 245, 263.

25 Boersma, Inventing Structures for Industrial Research.

26 For example, Marconi's Wireless, Telefunken, and the Compagnie Générale de Télegraphie sans Fil. Blanken, Ivo J., The History of N.V. Philips'Gloeilampenfabrieken (Eindhoven, 1992), 221–45Google Scholar.

27 Ibid., 263.

28 Oreo meetings, 1934 and 1953, 75:8, Philips Company Archive, Eindhoven (hereafter PCA). (The PCA's policy is that only short citations can be published.)

29 Boersma, Inventing Structures for Industrial Research, 57–61.

30 De Vries, Eighty Years of Research, 68–72.

31 Blanken, Ivo J., Geschiedenis van Koninklijke Philips Electronics N.V.: Een Industriële Wereldfederatie, Deel 5 (1950–1970) (Zaltbommel, 2002), 125Google Scholar; Boersma, Inventing Structures for Industrial Research; de Vries, Eighty Years of Research, 54.

32 Davids, Mila, “Het Philipscomplex,” in Techniek in Nederland in de Twintigste Eeuw, eds. Schot, Johan W. et al. (Zutphen, 2003), 6: 357–75Google Scholar.

33 Vice chairman was Frits Philips, following in the footsteps of his father Anton Philips after his retirement in 1939. The experienced commercial manager O. M. E. Loupart and H. F. van Walsem, a lawyer who together with Otten had been the main adviser of Anton Philips, also became presidium members. Blanken, De ontwikkeling, 310–13, and Geschiedenis van Koninklijke Philips 5, 15–22.

34 In 1965 the Industrial Components and Materials (Icoma) and the Electron Tubes product divisions merged into Elcoma. In the 1950s H. Hazeu was the technical and G. Jenneskens the commercial director of the Electron Tubes product division. Blanken, De ontwikkeling, 310–13, and Geschiedenis van Koninklijke Philips 5, 15–22; De Vries, Eighty Years of Research, 105.

35 Jones, Geoffrey, “Foreign Multinationals and British Industry before 1945,” Economic History Review 41 (1988): 429–53CrossRefGoogle Scholar.

36 Blanken, Geschiedenis van Koninklijke Philips 5, 15–20.

37 Ibid.; Boersma, Inventing Structures for Industrial Research; de Vries, Eighty Years of Research, 109–48.

38 Convinced of the importance of research for industrial development and aware of the lead of American scientists, the Dutch government established in 1946 the Foundation for Fundamental Research in Matter (FOM, Stichting Fundamenteel Onderzoek der Materie) and three years later the organization for Pure Scientific Research (ZWO, the organization for Zuiver Wetenschappelijk Onderzoek). Faber, Jasper, Kennisverwerving in de Nederlandse Industrie, 1870–1970 (Amsterdam, 2001), 44–7Google Scholar.

39 Blanken, Geschiedenis van Koninklijke Philips 5, 123–9; De Vries, Eighty Years of Research, 110–13.

40 Ibid. The results of Philips in this period were positive. From the end of the 1940s onwards Philips' turnover grew and the net profit increased from 4.2 percent in 1947 to around 6 percent in the 1950s.

41 De Vries, Eighty Years of Research, 112–13.

42 E 11.34, Quo Vadis meetings, 1949, PCA.

43 With the new management structure, part of the tasks of the Orientation Committee (Oreo)–established in 1932 to stimulate the exchange of information and the cooperation between the various departments–came under the responsibility of the board of directors. Oreo had the responsibility of aligning the general management activities and decisions with those of other parts of the company. Lopes Cardozo represented the COB in Oreo, together with three board members (Guèpin, Loupart, and Tromp), representatives of the Natlab (Casimir, Rinia, and Verweij), the patent department (Oudemans and Vandam), the secretary's office (Schaafsma), and the directors of all product divisions. Hazeu and Jenneskens represented the Electronic Tubes product division.

44 Riordan and Hoddeson, Crystal Fire; Braun and MacDonald, Revolution in Miniature.

45 Stand der ontwikkeling en fabricage 1947, D 22.24 (0.41), PCA.

46 De Vries, Eighty Years of Research.

47 “Transistorpionier ir. L.J. Tummers zilveren jubilaris,” Philips Koerier, 7 Mar. 1974.

48 Stand der ontwikkeling en fabricage 1947, D 22.24 (0.41); Oreo meeting, 27 Feb. 1952, 75:8; Oreo meeting, 25 Mar. 1952, 75:8; Quo Vadis meetings, April 1957–July 1961, D 22.24: E 11.34, all at PCA; de Vries, Eighty Years of Research, 123.

49 De Vries, Eighty Years of Research, 126.

50 Transistor Appliactie Groep (TAG), 1 Oct. 1952–1 Dec. 1953, 75:8, PCA.

51 Chandler, Alfred D. Jr., Inventing the Electronic Century: The Epic Story of the Consumer Electronics and Computer Industries (New York, 2001), 6Google Scholar.

52 Stand der ontwikkeling en fabricage 1947, D.22.24 (0.41), PCA.

53 De Wind, Ger, “Philips Semiconductors Nijmegen: Een halve eeuw mensen in en om een high tech-bedrijf, 1953–2003,” master's thesis, Open University, the Netherlands, 2004Google Scholar. The production of diodes (40,000 a week in April 1954) was transferred to Heerlen in 1955.

54 Vander Spek et al., Overzicht vande ontwikkelde en gefabriceerde producten uit Nijmegen, 1 Jan. 1956–1 Jan. 1960, E 11.34, PCA.

55 Quo Vadis meetings, Bijlage 532,1953, E 11.34, PCA.

56 Riordan and Hoddeson, Crystal Fire; Shockley, William B., Electrons and Holes in Semiconductors (New York, 1950Google Scholar); Choi, “Between Research and Production.”

57 Choi, “Between Research and Production”; Riordan and Hoddeson, Crystal Fire.

58 Verbong interview with Dr. P W. Haaijman, adjunct director of Natlab, 12 Jan. 1981.

59 De Vries, Eighty Years of Research; Jan. 1953–Dec. 1956, E.11.34, PCA.

60 Riordan and Hoddeson, Crystal Fire.

61 Oreo meetings, 1 Jan. 1953–1 Jan. 1954, 75:8, PCA.

62 Oreo meetings, 25 Mar. 1952 and 8 Apr. 1952, 75:8, PCA.

63 Choi shows how the geographic distance between laboratory and production facilities hampered the transistor development at RCA. Choi, “Between Research and Production.”

64 Oreo meetings, 1 Jan. 1955–1 Jan. 1956, 75:8, PCA.

65 Quo Vadis meetings, Apr. 1957–July 1961, D 22.24: E 11.34, PCA.

66 Although the staff had grown considerably, more workers were needed. Vander Spek et al., Overzicht vande ontwikkelde en gefabriceerde produkten uit Nijmegen, 1 Jan. 1956–1 Jan. 1960, E 11.34, PCA.

67 Ibid.

68 Christensen, The Innovator's Dilemma.

69 TAG, 1 Oct. 1952–1 Dec. 1953, D 22.24, PCA; de Vries, Eighty Years of Research, 112–13.

70 TAG, 1 Oct. 1952–1 Dec. 1953, D 22.24, PCA.

71 TAC, 1 Nov. 1953–1 July 1955, D 22.24, PCA.

72 Ibid.

73 Onno de Wit, “Radio tussen verzuiling en individualisering,” in Techniek in Nederland in de twintigste eeuw, Deel V: Transport & communicatie, eds. J. W. Schot et al. (Zutphen, 2002), 223.

74 Riordan and Hoddeson, Crystal Fire.

75 TAC, 1 Nov. 1953–1 July 1955, D 22.24, PCA.

76 Quo Vadis meetings, Apr. 1957–July 1961, D 22.24: E 11.34, PCA.

77 Halfgeleiders 1952/1957, D 22.24, PCA.

78 De Wind, “Philips Semiconductors Nijmegen.”

79 Tilton, International Diffusion of Technology.

80 Octrooisituatie Halfgeleiders, 1 Jan. 1956–1 Mar. 1960, E 11.34, PCA.

81 During the 1950s and 1960s the Pentagon invested heavily in the U.S. semiconductor industry. Its contribution rose from 15 million dollars in 1955 to 294 million in 1968. Tilton, International Diffusion of Technology, 90.

82 Oreo meetings, 1 Jan. 1955–1 Jan. 1956, 75:8, PCA; Blanken, , Geschiedenis van Koninklijke Philips 5, 79Google Scholar.

83 Ibid., 345–89.

84 Philips' internal deliveries of transistors (for both consumer and industrial products) were always substantial, ranging from 20 percent to 30 percent at the end of the 1950s. The percentage rose from 22 percent in 1957–58 to 36 percent in 1958 and 1959. Over the next four years, the percentage remained around 28 percent. Unfortunately, we have only figures from the end of the 1950s and the beginning of the 1960s. See 1960–69, D 22.24, PCA.

85 The production of layer transistors started only in 1954, because the Electron Tubes product division only wanted to produce them with the alloying process of RCA, which became available later than expected. And the production problems restricted the number of available transistors. Secondly, the first transistor types (point-contact and layer transistors) were not suitable for high frequencies and power applications, and the pd divisions had to wait until they were developed.

86 Quo Vadis meetings, Apr. 1957–July 1961, D 22.24: E 11.34, PCA.

87 Transistor Contact Groups, 1 Nov. 1953–1 July 1955, D 22.24, PCA.

88 Choi, “Between Research and Production.”

89 Lécuyer, Making Silicon Valley, 169–209.

90 From the 1970s onward in most large companies, various measures were taken to change the role of the centralized research facilities. Apart from the organizational changes and the more decentralized finance mechanism that occurred in most Dutch large companies (Unilever, DSM, and also Philips), American corporations “began linking the compensation of central research personnel to the economic objectives of the corporation.” There have been a number of studies of these financial incentives. Lerner and Wulf, for example, conclude that, in firms with centralized R&D, more long-term incentives are associated with more frequently cited patents. Cockburn, Henderson, and Stern found “a positive correlation between measures of the use of promotion-based incentives for basic research and of team-based incentives for applied research.” Josh Lerner and Julie Wulf, “Innovation and Incentives: Evidence from Corporate R&D,” NBER Working Paper No. 11944 (2006); Iain M. Cockburn, Rebecca M. Henderson, and Scott Stern, “Balancing Incentives in Pharmaceutical Research,” revised version of NBER Working Paper No. W6882 (Aug. 2004, supplied by the authors).