Which of the following is the most common reason why more companies do not create disruptive innovations?

• A. Established companies often focus on sustaining existing products and markets rather than pursuing risky new innovations.
• B. Government regulations universally prevent companies from developing disruptive technologies.
• C. Disruptive innovations always require large amounts of initial capital, which most companies lack.
• D. Most companies do not have access to any information about new technologies.

Answer: (A)

Verified step by step guidance

1. Understand the concept of disruptive innovation: Disruptive innovations are new products or technologies that initially target a niche market but eventually displace established products or markets.
2. Analyze the behavior of established companies: Established companies often prioritize sustaining innovations, which improve existing products for current customers, because these are less risky and more predictable in terms of returns.
3. Consider the role of risk and resource allocation: Pursuing disruptive innovations involves uncertainty and potential failure, which can deter established firms from investing heavily in them.
4. Evaluate the given options: Government regulations, capital requirements, and access to information can be factors, but the primary reason is the strategic focus of established companies on sustaining existing products rather than disruptive innovation.
5. Conclude that the most common reason is that established companies focus on sustaining existing products and markets rather than pursuing risky new innovations, which limits their engagement with disruptive innovations.