The effect of rarity and uncertainty on innovation value

This paper addresses the core notions of the Resource Based View, that rarity provides superior performance. We examine the limits of rarity as a driver of performance in the process of innovation. We also claim that uncertainty affects this process, both directly and moderating the effect of rarity. Using patent data relative to hydrocracking – a mature technology experiencing periods of stable and
unpredictable development – we find that rarity has a U-shaped effect on innovation value, as both rare and non-rare inventions are valuable. Uncertainty has an inverted U-shaped effect on innovation value, as in conditions of low uncertainty incremental innovation tends to prevail, while high uncertainty leads to imitation of successful practices. Low, but not high, uncertainty moderates the relationship
between rarity and innovation value.