Innovations in technology have affected productivity growth in several ways. The Wall Street Journal article: The Problem with Innovation: The Biggest Companies Are Hogging All the Gains asserts that because smaller companies cannot compete with the initial output of costs needed to acquire the latest and most innovative technology in their industry, bigger companies are able to take an unfair advantage.

The example used is that of a one of the largest construction firms in Sweden named Skansk AB. This company has built a partnership with IKEA and has been successful with innovative ideas to build affordable housing. This new project taken on by these two companies is relying mostly on robots to build ready-made rooms in their factory. They are later put together like Lego houses. This process can cut down the time to build and furnish a building in half the time and reduce cost by 35%. They are able to produce about 1,200 affordable homes a year and are looking to increase their production by 50%.

“The project shows how big firms can exploit economies of scale offered by new technology and global markets. Companies with more orders can better shoulder upfront investments because each new unit produced will be less expensive” (Douglas, 2018).

The article goes on to show as another example to prove their point, that a smaller construction firm in the same area attempted to industrialize their production and failed. They were unable withstand the fluctuating markets and maintain the high fixed ongoing costs that a bigger company can. The discussion continues with research that shows that productivity growth has slowed considerably since the 2008 economic crisis. The evidence their research has found is that the slowdown is caused by diffusion. With the constant innovations in technology, competition is even greater. “These days, retailers are under threat from online competitors such as Inc., spurring a new productivity race at the top. Data show the most productive companies are usually the biggest. Globalization allowed them to grow bigger, while giving some specialized niche firms a big enough market to succeed” (Douglass, 2018).

For large companies like Amazon or Facebook the benefits of scale are quite significant. The article then continues with how advanced technology is out of reach for a lot of companies and those that are able to experiment with it have gained a substantial lead over everyone else. The issue that the conclusion tackles is that while some of the larger companies are able to push forward with the newest technology, some of the companies that are lagging behind are those that are vital to the supply chain for a lot of them and it needs to be addressed.

This article offered an example of how technology, which is incredible in so many ways, has the drawback of growing and changing too quickly for us to catch up. What is corporate strategy?

“The decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously”. (Rothaermel, 2016).

In order to stay in business, we must stay competitive. To stay competitive, we need to understand the industry we are in and decide how we will set ourselves apart. The article discussed how larger companies like Amazon or Kroger (grocery) are able to take the competitive lead because they have the money to invest in the most innovative technology.

What can all the smaller companies do?

I take my children to the farmers market near me on the weekends. It made me think of how smaller grocery stores can compete with the larger ones like Ralphs or Vons. We have a grocery store called Lazy Acres which started out in Santa Barbara, it set itself apart by being a healthy and organic store which promoted the importance of using local products in their stores. Because they could not compete with the bigger stores, they had to find their niche. By partnering with local vendors and concentrating on the customer/employee relationship they were able to do just that. They are able to charge a higher price for some of their products because they are organic, natural or locally supplied and people are willing to pay a higher price for that distinction.

The opportunity to buy from local vendors and in larger quantities allows them to keep their costs down. The business began in 1991 and in 2018 they have grown to five stores. The increased interest in organic and natural foods increased the need for these types of products. We have Sprouts, Mothers and Trader Joe’s that all compete in that area. It will be interesting to see how larger companies will affect these stores or if they will all be bought out similar to the way Amazon purchased Wholefoods. Hopefully, we will still be able to see small companies survive and compete even with the advantages of the bigger companies and their global reach and technological advances.

Rothaermel, F. (2016). Strategic Management: Concepts, 3rd Edition. New York, NY: McGraw-Hill Education.

Douglas, J, Sindreu, J and Kantchev, G (2018) The Problem With Innovation: The Biggest Companies Are Hogging All the Gains. Wall Street Journal