ABSTRACT
Firm-formation is increasingly central to innovation strategy. The typical large-fi rm innovation decision-making process compares present profi ts from existing technologies with the diffi cult start-up phase of products based on new technology. The investment required by the new product is balanced against profi ts that might be made from further investment in existing products and the latter path is usually taken. The potential for the new product cannibalizing the market for the old is another counterweight to internal innovation. Some fi rms, like GE, that formerly based their growth on new products emanating from research have, in recent decades, given up this strategy in favor of acquisition.1
