The Resource Curse Thesis was developed in the 1990s by Richard Auty. Resource-rich countries, countries with an abundance of natural resources, have slower growing economies than resource-poor countries. Does the same apply to innovation? Are resource-poor firms better at innovation than those that have abundant resources?
Apple versus Google
The table below, which is taken from a recent research paper by Scott Sonenshein, illustrates with Google vs. Apple, that although the resource curse may apply to some firms, it may not apply to all.
The resource-poor as innovators
Most of us expect entrepreneurs to be more innovative than established firms, despite the fact that most entrepreneurs are “resource-poor”: short of cash, with limited access to resources and often lacking in experience. Why would they be better innovators? Because they are driven. For them, innovation is a matter of survival.
The resource-rich as innovators
Yet the case of Apple shows that there is also something to be said for the “resource-rich” as drivers for innovation. Since innovation can be very expensive, an abundance of resources makes it easier to explore new ideas and tap into the knowledge of others, making innovating simpler to accomplish.
Anyone who is motivated can drive innovation, regardless of their resources. However, there is a significant difference in how goals are accomplished in resource-rich and -poor environments:
- The resource-poor innovate out of necessity, from scratch. The resource-rich innovate because they see opportunities for improvement or growth.
- The resource-poor entrepreneurs have to take ownership, do it all their own way, and assume personal credit or blame for the outcomes. The resource-rich firms figure out novel solutions in a more controlled environment—though too much control stifles innovation—and the credit or blame is shared.
The best help for the resource-poor is offering great advice. Giving them resources would make them resource-rich and they would fall into the other paradigm!
Interested in understanding what the implications are for your organization? Please contact us at info “at” organizing4innovation “dot” com. References Sonenshein, Scott (2014) How Organizations Foster The Creative Use of Resources, Academy of Management Journal; and Auty, Richard M. (1993), Sustaining Development in Mineral Economies: The Resource Curse Thesis, London: Routledge.