Journal of Operations Management 16 Ž1998.

471–494

Innovation implementation in high technology manufacturing: A

chaos-theoretic empirical analysis
Shekhar Jayanthi a , Kingshuk K. Sinha b,)

a
Manufacturing Engineering, UniÕersity of Cambridge, Mill Lane, Cambridge CB2 1RX, UK
b
Operations and Management Science Department, Carlson School of Management, UniÕersity of Minnesota, Minneapolis, MN 55455,
USA

Abstract

This paper conceptualizes the process of innovation implementation in high technology manufacturing, a natural setting
of multiple and ongoing innovation implementation. Building on the developments in organizational learning theory, we
frame the process of innovation implementation in high technology manufacturing as a problem of balancing between
exploitation and exploration. Through the application of a logistic difference equation, we provide insights into the dynamics
of balancing between exploitation and exploration, and show that innovation implementation in high technology manufactur-
ing can be conceptualized as a chaotic process, in a scientific sense. Using time series data from a wafer fabrication plant,
the high technology manufacturing plant that served as our research site over a period of 125 weeks, we test this
conceptualization. We find empirical support for the conceptualization of innovation implementation in high technology
manufacturing as a chaotic process. We discuss the managerial implications of our study’s findings, and the directions for
the future research. q 1998 Elsevier Science B.V. All rights reserved.

Keywords: Innovation implementation; High technology manufacturing; Chaos theory

1. Introduction competitiveness, process technologies are upgraded,

Innovation is now considered to be a critical
competitive capability of manufacturing plants
ŽMiller and Roth, 1994.. With the life cycle of
products becoming shorter and shorter—a trend that
is observable in most manufacturing industries Žvon
Braun, 1990, p. 50. —new product introductions are
becoming increasingly frequent in plants. To support
the manufacture of new products and improve plant
)
Corresponding author. Tel.: q1-612-624-7058; fax: q1-612-
626-8328; e-mail: ksinha@csom.umn.edu
or are replaced with new and advanced process
technologies, or both; operational and organizational
practices are modified or changed. Introductions of
new products, changes and modifications in process
technologies, organizational and operational prac-
tices occur most frequently in high technology plants
ŽRiggs, 1983; Mohrman and Von Glinow, 1990a,b..
In fact, rapid and repeated innovation implementa-
tion is absolutely central to any high technology
manufacturing operations ŽJelinek and Schoonhoven,
1990..
Implementing innovation and replicating it within
a firms operating environment is one of the chief

0272-6963r98r$19.00 q 1998 Elsevier Science B.V. All rights reserved.

PII S 0 2 7 2 - 6 9 6 3 Ž 9 8 . 0 0 0 2 5 - 4
472 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
challenges of managing innovation ŽPisano, 1994..
According to Van de Ven Ž1993., implementation is
the least understood aspect of the innovation process.
More recently, this concern is also echoed by Klein
and Sorra Ž1996. Žp. 1072. who refer to implementa-
tion as ‘‘the neglected member of the innovation
family.’’
This paper is an attempt to conceptualize the
process of innovation implementation in high tech-
nology manufacturing operations—a natural setting
of multiple and ongoing innovation implementation.
High technology manufacturing operations are proto-
typical of future manufacturing operations in other
industries. The pressure on manufacturing operations
due to the rapid pace of technological changes,
market volatility, and global competition that were
once considered to be unique features of high tech-
nology industries are becoming increasingly visible
in other industries, as well.
The content of this paper is organized as follows.
In Section 2, we review the relevant literature. In
Sections 3 and 4, we discuss the theoretical and
methodological foundations of this study, respec-
tively. Section 5 contains a description of our re-
search setting. We present the discussion on empiri-
cal analysis in Section 6, and our conclusions in
Section 7.
2. Literature review
2.1. Stages of the innoÕation process
The locus of innovation in this study is the orga-
nization. Consistent with Van de Ven Ž1986., we
consider innovation as an idea that is perceived to be
new by the organization although it may appear to be
an imitation of something that exists elsewhere. This
definition purposefully makes no distinction between
technical innovations Že.g., new process technologies
and products. and administrative innovations Že.g.,
new operational and organizational practices. be-
cause such distinction often results in a fragmented
classification of the innovation process.
The overall process of innovation is a sequence of
three stages: invention of new ideas, followed by
their development and adoption. In a recent review
of the innovation literature, Van de Ven Ž1993. Žp.
271. has observed that ‘‘specialized fields of study
and research have emerged for each of these three
innovation stages.’’ The idea inÕention stage has
been investigated both by psychologists Že.g., Cum-
mings, 1965; Amabile, 1983; Angle, 1989. and
economists Že.g., Rosenberg, 1982; Thirtle and Rut-
tan, 1987.. The deÕelopment stage has been investi-
gated by several management scholars Že.g., Utter-
back and Abernathy, 1975; Burgelman, 1983; Kan-
ter, 1983; Tushman and Romanelli, 1985; Van de
Ven et al., 1989.. The adoption stage has been
widely investigated by social scientists, in general.
However, research on the adoption stage has been
primarily focused on innoÕation diffusion—i.e.,
marketing, dissemination, and transfer of an innova-
tion to the end users Že.g., Rogers, 1983; Mahajan et
al., 1990.. The implementation phase of the adoption
stage, which determines the eventual success or fail-
ure of the innovation, has not received much atten-
tion ŽRice and Rogers, 1980; Van de Ven, 1993;
Klein and Sorra, 1996.. Following Gerwin and
Kolodny Ž1992., we define the implementation phase
as the period of time from the initial tryout of the
innovation until its full scale operation is attained.
Based on the studies of the Minnesota Innovation
Research Program, 1 Van de Ven Ž1993. Žp. 280.
identified the following two issues as being critical
to advancing our understanding of the innovation
process: Ži. the need for extending the conceptualiza-
tion of the innovation process to include re-definition
of the innovation by the organizational participants
in order to implement the innovation, and Žii. the
need for correcting the depiction of users within the
organization as developing or implementing only a
single innovation; in fact many users simultaneously
choose from diÕerse sets of innoÕation in many
different areas, such as products, processes and prac-
tices. We address both issues in this paper.
2.2. InnoÕation in manufacturing
Manufacturing operations is an appropriate con-
text for examining the re-definition of innovations as
1
A multi-year, multi-organizational and multi-investigator re-
search program. See Van de Ven et al. Ž1989. for more details on
the studies that were a part of the program.
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
they are implemented in an organization Že.g.,
Kazanjian and Drazin, 1986; Ettlie, 1988; Leonard-
Barton, 1988, 1990; Schroeder et al., 1989; Tyre,
1991; Ettlie and Reza, 1992; Tyre and Hauptman,
1992; Georgantzas and Shapiro, 1993; von Hippel
and Tyre, 1995; Tyre and Orlikowski, 1994; Ettlie,
1995.. In fact, manufacturing operations is also an
appropriate context for examining the simultaneous
implementation of diverse sets of innovations. For
example, Ettlie Ž1988., and Georgantzas and Shapiro
Ž1993. have noted that the general trend in manufac-
turing plants is toward the implementation of ‘syn-
chronous innovations’, i.e., the simultaneous imple-
mentation of technological and administrative inno-
vations. In the same vein, Gerwin and Kolodny
Ž1992. have noted that implementation of new manu-
facturing technologies often occurs simultaneously
with implementation of new operational practices
that are aimed at supporting the new technologies.
Typically, innovation implementation has been
considered to be a source of uncertainty in manufac-
turing operations ŽHayes and Clark, 1985; Gerwin
and Kolodny, 1992.. For instance, Van de Ven and
Polley Ž1992. have alluded to unexpected critical
problems that were encountered in the scale-up pro-
duction of therapeutic apheresis—a biomedical prod-
uct. More generally, Chew et al. Ž1991. Žp. 5. have
associated implementation of manufacturing innova-
tions with ‘Murphy’s Law’, i.e., ‘‘whatever can go
wrong, will.’’ With increasing complexity of opera-
tions—due to the interactions between the introduc-
tion of new products, changes and upgrades in pro-
cess technologies, and the ongoing efforts to auto-
mate and integrate the operations—the uncertainties
associated with innovation implementation have been
exacerbated to such an extent that they are now
considered to be a permanent rather than a transient
feature of the modern manufacturing plant ŽWeick,
1990.. As a result of these uncertainties, ‘‘learning
occurs slowly and wastefully if at all’’ ŽGerwin and
Kolodny, 1992., and as Weick Ž1990. Žp. 1. ob-
serves, modern manufacturing operations ‘‘creates
unusual problems of sensemaking for managers and
operators.’’ Therefore, Tyre and Orlikowski Ž1994.
Žp. 98., who have used manufacturing as their con-
text of innovation research, argue that it is ‘‘only by
understanding how technological adaptation winnova-
tion implementationx occurs can we begin to build
473
more adequate theories of technological change win-
novationx in organizations.’’ This study is a step in
that direction.
3. Theoretical foundation
3.1. Exploitation and exploration in high technology
manufacturing
High technology firms exist in ‘‘high velocity
environments’’ ŽMohrman and Von Glinow, 1990b,
p. 291.. In the literature on strategic decision making
in organizations, where the term was originally
coined, high velocity environment is defined as an
environment ‘‘in which there is rapid and discontin-
uous change in demand, competitors, technology
andror regulation’’ ŽBourgeois and Eisenhardt, 1988,
p. 816.. This is an environment in which ‘‘if you do
not innovate, someone else will’’ ŽEisenhardt, 1989,
p. 570.. In order to innovate rapidly and repeatedly,
and survive and prosper in high velocity environ-
ments, high technology firms use ‘‘experiential strat-
egy’’ involving ‘‘accelerated learning through itera-
tion and testing combined with motivation and focus
of leadership and frequent milestones’’ ŽEisenhardt
and Tabrizi, 1995, p. 107..
Based on their case studies in high technology
firms, Jelinek and Schoonhoven Ž1990. conclude that
manufacturing operations is the end-game in the
innovation cycle where innovations are implemented,
and the competition is ultimately played out. We
infer from these case studies that manufacturing
operations of a high technology plant is the focus of
a dynamic tension between innovations related to the
current demands of the market place and innovations
related to the future demands of the market place.
The dynamic tension is a result of manufacturing
operations having to simultaneously respond to short
and long term competitive pressures—striving for
higher quality, flexibility and productivity amidst
ever changing product characteristics and increas-
ingly complex process technologies. It is this dy-
namic tension between innovations related to the
current demands of the market place and innovations
related to future demands of the market place that is
fundamental to conceptualizing the process of inno-
474 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
vation implementation in high technology manufac-
turing.
Building on the developments in organizational
learning theory, we posit that the dynamic tension
between innovations related to the current demands
of the market place and the future demands of the
market place can be framed as a problem of balanc-
ing between ‘‘exploitation’’ and ‘‘exploration’’
ŽMarch, 1991; Levinthal and March, 1993, pp. 105–
106.. Innovations related to the current demands of
the market place are exploitatiÕe-actiÕities that in-
clude modification and refinement of existing prod-
ucts, equipment, process technologies and opera-
tional practices aimed at high volume, reliable and
replicable production. The purpose of such innova-
tions is to ensure the survival and prosperity of a
plant in the present. Innovations related to future
demands of the market place are exploratory-actiÕi-
ties that include experimentation with new process
technology and equipment designs, or experimenta-
tion with new product designs, or both. The purpose
of such innovations is to ensure the survival and
prosperity of a plant in the future.
Engaging exclusively in either exploitation or ex-
ploration is potentially self-destructive for an organi-
zation. The returns to exploitation are ordinarily
more certain, closer in time, and closer in space than
are the returns to exploration. As a result, organiza-
tions discover the short term virtue of exploitation
and the folly of exploration. As organizations de-
velop greater and greater competence in
exploitative-activities, they engage more and more in
such activities, thus further increasing the opportu-
nity cost of exploration. This is referred to as the
success trap. For example, consider a manufacturing
plant that is focused exclusively on innovations aimed
at high volume reliable and replicable production of
its existing products. Such a plant will find it ex-
tremely difficult to make a quick and smooth transi-
tion to high volume reliable and replicable produc-
tion of new line of products. As a result, the plant
will become obsolescent once its products become
outdated in the market place, a problem that is
becoming quite common with decreasing life cycle
of products.
On the other hand, organizations engaged exclu-
sively in exploration, can be turned into frenzies of
experimentation and change by a dynamic of failure.
Failure leads to search and change which leads to
failure which leads to more search, and so on. This is
referred to as the failure trap, where an organization
is trapped into endless cycle of failure and unreward-
ing change. Pure exploration can be self-destructive
because an organization is never likely to benefit
from the returns of its knowledge gained from exper-
imentation. For example, a plant that is focused
exclusively on experimenting with new product and
process designs, and makes no efforts toward attain-
ing commercially reliable and replicable production
volumes is not likely to survive for very long. Main-
taining a balance between exploitation and explo-
ration is key to the survival and prosperity of organi-
zations. In other words, organizations should simul-
taneously engage in sufficient exploitation to ensure
its current viability and sufficient exploration to en-
sure its future viability ŽMarch, 1991; Levinthal and
March, 1993..
3.2. The dynamics of balancing between exploitation
and exploration
As we discussed earlier, understanding the dy-
namic tension between innovations related to the
current demands of the market place and innovations
related to the future demands of the market place is
fundamental to conceptualizing innovation imple-
mentation in high technology manufacturing. We
also posited that this dynamic tension can be framed
as a problem of balancing between exploitation and
exploration. Recently, Cheng and Van de Ven Ž1996.
have used the logistic difference equation to concep-
tually illustrate the dynamics of balancing between
exploitative and exploratory activities of an organiza-
tion. Following Cheng and Van de Ven, we use the
logistic difference Eq. Ž1. to gain conceptual insights
into the process of innovation implementation in
high technology manufacturing. Let,
x t s kx ty1 Ž 1 y x ty1 . Ž 1.
where, x t is the percentage of exploitative-activities
in response to the current demands of the market
place at time, t, and assumes values between 0 and
1. 1 y x t is the percentage of exploratory-activities
in response to the future demands of the market
place at time, t. The parameter, k, determines the
degree of non-linearity of Eq. Ž1.. At an intuitive
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
level, k, may be associated with the relative strengths
of the current and future demands of the market
place. As the value of k increases, the severity of
tension between the current and future demands of
the market place increases. According to Eq. Ž1., the
exploitative-activities in response to the current de-
mands of the market place at time, t, are determined
by its value in the earlier time period, t y 1, and the
parameter, k. Hence, balancing between the current
and future demands of the market place implies that
plant managers engaged in exploitative-activities at a
given time period will experience pressure to allo-
cate more time in the next time period for ex-
ploratory-activities, and vice-versa. Insights into the
dynamics of balancing between exploitation and ex-
ploration can be obtained by varying the parameter,
k.
Following May Ž1976., a seminal paper on the
properties and structure of first-order difference
equations, we consider three cases corresponding to
three different ranges of values of k.
3.2.1. Case 1 (k F 3)
The limiting value of x t s lim t ™` x t is a single
stable point. For example, when k s 1.8 and the
initial value of x t , x 1 s 0.45, the single equilibrium
value of x t is 0.44. Fig. 1A depicts the time path of
x t , and Fig. 1B depicts the corresponding phase
plot 2 which in this case is a single fixed point. Case
1 represents a situation where the tension between
the current and the future demands of the market
place is minimal, and maintaining a balance between
exploitative and exploratory activities is not difficult
because their relative proportions are a constant over
time.
3.2.2. Case 2 (3 - k F 3.57)
The time path of x t is periodic. For example,
when k s 3.2, Fig. 1C shows how the time path
settles down to a periodic behavior with period 2,
with x t varying between 0.5130 and 0.7995; the
corresponding phase plot, Fig. 1D, is a straight line
2
In a phase plot, the values of time series observations are
plotted against one another at some constant lags—for example,
value at time, t, is plotted against the value at time, t q1, or t q2,
or t q3, and so on.
475
between two points. When k is greater than 3.45 but
less than 3.57, the number of periods increases to 4,
8, 16, etc. Case 2 represents a situation where the
tension between the current and the future demands
of the market place is greater than case 1. However,
the difficulty in balancing between the exploitative
and exploratory activities is eased because the activi-
ties vary in fixed proportions and periodically over
time, and are therefore predictable.
3.2.3. Case 3 (3.57 - k F 4)
The time path of x t is chaotic, in a scientific
sense, i.e., there is an order underlying the seemingly
random and disorderly behavior of the time path. For
example, when k s 3.65, Fig. 1E exhibits the time
path of x t which appears to be random; it is neither
repeating itself nor is stabilizing. The corresponding
phase plot, Fig. 1F, shows that the points are at-
tracted to a certain section of the phase space in the
shape of a cup. Case 3 represents a situation where
there is severe tension between the current and the
future demands of the market place, and there is
considerable difficulty in balancing between ex-
ploitative and exploratory activities because their
relative proportions appear to be varying randomly
over time in an unpredictable manner. 3
Of the three cases, case 3 exemplifies the process
of innovation implementation in high technology
manufacturing. As indicated earlier, fundamental to
conceptualizing this process of innovation implemen-
tation is the dynamic tension between the current and
the future demands of the market place, and the
problem of maintaining a balance between exploita-
tive and exploratory activities. Simultaneous pres-
ence of strong counteracting forces—negative feed-
back Že.g., exploitation. that decrease instability, and
positive feedback Že.g., exploration. that increase
instability—is a necessary condition for chaotic be-
3
For k ) 4, all solutions are attracted to y`. This represents a
situation where the tension between the demands for stability and
change is so severe that the balance between exploitative and
exploratory activities cannot be maintained. As Levinthal and
March Ž1993. Žpp. 105–106. note: ‘‘sometimes exploitation drives
out exploration’’ Žthe success trap., and sometimes ‘‘exploration
drives out exploitation’’ Žthe failure trap.. Both of these situations
are self-destructive because an organization is not likely to survive
and prosper under such conditions.
476 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494

Fig. 1. Illustration of the dynamics of balancing between exploitation and exploration using a logistic difference equation x tq 1 s kx t
Ž1 y x t ., x 1 s 0.45, t s 1,2,3, . . . ,123. ŽA. Stable time path, k s 1.80. ŽB. Phase plot for the stable time path. ŽC. Periodic time path,
k s 3.20. ŽD. Phase plot for the periodic time path. ŽE. Chaotic time path, k s 3.65. ŽF. Phase plot for the chaotic time path Žstrange
attractor.. ŽG. Random time path Ždata in E is randomly shuffled.. ŽH. Phase for the random time path.
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
´
havior ŽThietart and Forgues, 1995.. It is evident
from Fig. 1E and F that although the relative propor-
tions of exploitative and exploratory activities ap-
pear to be varying randomly over time ŽFig. 1E., a
balance between these activities is being maintained
because in the corresponding phase plot ŽFig. 1F. the
observations lie in a certain section of the phase
space in the shape of a cup. If the variations in the
relative proportions of the exploitative and ex-
ploratory activities were truly random, the observa-
tions in the phase plot would be scattered throughout
the phase space. For an illustration, see Fig. 1G and
H. In Fig. 1G, the sequence of the values of x t that
resulted in the time path depicted in Fig. 1E is
randomly shuffled and plotted over time. While the
time path in Fig. 1G appears to be as irregular as in
Fig. 1E, the corresponding phase plot, Fig. 1H,
shows that the observations are scattered throughout
the phase space.
In the preceding paragraphs, we showed that in-
novation implementation in high technology manu-
facturing can be conceptualized as a chaotic process,
in a scientific sense. In Section 3.3, we discuss the
characteristics of the innovation implementation pro-
cess that follow from this conceptualization.
3.3. Characteristics of innoÕation implementation
3.3.1. The presence of an attractor
In Fig. 1F, the region in the phase space Žin the
shape of a cup. to which the observations are bounded
is referred to as an attractor. A distinguishing char-
acteristic of the time path which is a realization of a
chaotic process is the presence of a strange attractor.
An attractor is a set of points in the phase space
trajectories that represents the possible states which a
dynamic process tends to take over time. Strange
refers to the geometrical structure of the attractor. 4
At an intuitive level, support for the presence of an
attractor as a characteristic feature of innovation
4
Ruelle and Takens Ž1971. were the first to describe the
attractors as ‘strange’ because of their unexpected and strangely
´
irregular shapes such as the ring-shaped attractor of Henon, the
butterfly wing shaped attractor of Lorenz, or the sugar bread
¨
shaped attractor of Rossler Žfor illustration, see Briggs and Peat,
1989; Peitgen et al., 1992..
477
implementation in high technology manufacturing is
evident in the findings of the case studies of Jelinek
and Schoonhoven Ž1990.. Employees of high tech-
nology manufacturing plants routinely finagle time
to engage in innovative activities amidst their regu-
larly scheduled work. ‘‘Such finagling is expected
and encouraged wby the managementx within some
loose limits’’ ŽJelinek and Schoonhoven, 1990, p.
301.. Similarly, Eisenhardt and Tabrizi Ž1995. Žp.
108. have found that within limits the employees of
high technology firms are allowed to improvise and
engage in real time learning through iterations and
testing; the limits are defined through the ‘‘focus and
discipline of milestones and powerful leaders
wmanagersx’’. This implies that observations in a
phase plot corresponding to the time path of a mea-
sure of high technology plant performance can be
imagined as settling down into patterns, which while
never identical, is bounded in a region of the phase
space Žattractor..
3.3.2. SensitiÕe dependence on initial conditions
This is the other distinguishing characteristic of
chaotic behavior—no matter how close the initial
values of x t are, their time paths will ultimately
become far apart. For example, if the initial value of
the logistic difference Eq. Ž1. is changed from x 1 s
0.45 to xX1 s 0.45001, the time paths corresponding
to the two initial values will begin to deviate from
one another after a few time periods; see Fig. 2A.
This deviation is evident in Fig. 2B where we plot
the time path of the difference, x t y xXt . In the begin-
ning—for about 20 time periods—the difference is
almost zero, but thereafter the difference builds up
rapidly and becomes as large in magnitude as that of
the original time series observations on x t . At an
intuitive level, support for sensitive dependence on
initial conditions is evident in the findings of case
studies of Tyre and Orlikowski Ž1994. Žp. 113–114.
on innovation implementation: ‘‘The decisions and
directions taken during the short period following
initial installation—a period that may be as brief as
two to three months—are major determinants of how
the technology winnovationx will be used by the
organization over the long term.’’ In the same vein,
Weick Ž1990. Žp. 21. notes that ‘‘beginnings are of
special importance’’ during the implementation of
new technologies as it determines what sense the
478 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494

Fig. 2. Illustration of the chaotic property of sensitive dependence to initial conditions. ŽA. Time paths for x tq 1 s kx t Ž1 y x t ., k s 3.65,
X X
t s 1,2,3, . . . ,123. ŽB. Time path for x t y x t , x 1 s 0.45000, x 1 s 0.45001.

users will make of the technologies and the problems
that will arise.
4. Methodological foundation
The choice of research methodology should be
guided by theory ŽBlalock, 1969; Monge, 1990..
Since our conceptualization of innovation implemen-
tation in high technology manufacturing suggests
that it can be a chaotic process, it is necessary to
identify research methods that can diagnose chaotic
behavior. ‘‘Traditional linear statistical techniques,
such as time series regression, are not able to distin-
guish between chaos and randomness’’ ŽHibbert and
Wilkinson, 1994, p. 226.. Hence, we take recourse to
diagnostic techniques from chaos theory that make it
possible to distinguish between chaos and random-
ness in time series data.
4.1. Chaos theory: a brief oÕerÕiew
Chaos theory is a sub-set of dynamical systems
theory, the origins of which can be traced back to the
investigations of Poincare´ Ž1899. of the planetary
dynamics. Early work on the development and appli-
cation of chaos theory occurred in biology, meteorol-
ogy, physics, chemistry and computer science. In
recent years, chaos theory is beginning to appeal to
social science researchers because it provides an
opportunity to examine complex behaviors that pre-
viously eluded explanation ŽEtheridge and Sriram,
´
1993; Parker and Stacey, 1994; Levy, 1994; Thietart
and Forgues, 1995..
In a review article, Feichtinger and Kopel Ž1993.
suggest two categories of applications of chaos the-
ory in economics and management. The focus of the
first category is to develop simulation models that
imply chaos as a logical outcome of dynamic pro-
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
cesses. A common application of chaos theory that
belongs to this category is inventory management.
For example, there are studies in which chaos is
derived due to delays in adjusting production and
sales ŽSterman, 1988; Mosekilde and Larsen, 1988;
Rasmussen and Mosekilde, 1988; Levy, 1994..
The focus of the second category of applications
is to examine empirical data for detecting chaotic
behavior in the underlying dynamic processes. For
example, studies in economics and finance that have
found empirical support for chaotic patterns in time
series data belong to this category ŽBrock, 1986;
Brock and Sayers, 1988; Scheinkman and LeBaron,
1989.. Similarly, a recent study in the management
literature by Cheng and Van de Ven Ž1996. which
shows that the actions and outcomes experienced by
innovation teams exhibit a chaotic pattern in the
initial period of innovation development belongs to
the second category.
The present study also belongs to the second
category. We collected time series data that are
realizations of the innovation implementation pro-
cess in a high technology manufacturing plant. From
a methodological standpoint, the objective is to ex-
amine whether the data exhibits the two fundamental
properties of chaotic behavior: Ži. the presence of a
strange attractor, and Žii. sensitive dependence on
initial conditions.
4.2. Diagnostic techniques
Recent reviews of the interdisciplinary research
literature on chaos theory ŽChatterjee and Yilmaz,
1992; Berliner, 1992; Feichtinger and Kopel, 1993;
Hibbert and Wilkinson, 1994. suggest that estimation
of correlation dimension and LyapunoÕ exponents
are the commonly agreed upon diagnostics for em-
pirically examining the two fundamental properties
of chaotic behavior.
4.2.1. Correlation dimension
The phase plot, discussed earlier, is a visual means
of detecting a strange attractor and distinguishing
between chaotic and random behavior. However,
when the number of observations in a time series
data set is small Že.g., N - 200., as is normally the
case with empirical studies in economics and man-
479
agement, it is not possible to reliably detect the
presence of an attractor in a phase plot 5 ŽBrock et
al., 1991; Sayers, 1990; Cheng and Van de Ven,
1996.. Hence, we do not use phase plot as a diagnos-
tic technique in this study. Instead, we compute
correlation dimension which is a numerical measure
of the dimension of a strange attractor and can be
used to distinguish between chaos and randomness.
The notion of dimension is consistent with the basic
concepts that a point has dimension of zero, a line
has dimension of one, a plane has dimension of two,
and a cube has dimension of three. Let us consider
R n as the space or dimension in which the observa-
tions on the state of a system over time exist. Then,
if we consider an infinite sequence,  rt 4 , t s
1,2, . . . ,`, of uniformly distributed random numbers
on the w0,1x interval and plot them against each other,
 rt ,rtq14 , in two-dimensional space, they should fill
the square. If we plot these numbers against each
other,  rt ,rtq1 ,rtq2 4 , in three-dimensional space, they
should fill the cube. If we continue with spaces of
higher dimensions, we can see that in the limit,
random numbers are infinite-dimensional. A major
difference between a chaotic process and a truly
random process is that the truly random process will
have high dimension, whereas the chaotic process
will have low dimension. Hence, the identification of
chaotic behavior involves testing whether or not a
seemingly random process exhibits low dimensional
structure. We use the well-known algorithm pro-
posed by Grassberger and Procaccia Ž1983. to esti-
mate correlation dimension.
4.2.1.1. Estimation of correlation dimension. The
algorithm of Grassberger and Procaccia Ž1983. is
based on a geometric view of the attractor which is
5
The reason why the observations in the phase plot ŽFig. 1F.
exhibits a clear pattern in the shape of a cup with only 123 data
points—a pattern that is strikingly different from the phase plot
corresponding to the same time series data after it has been
randomly shuffled ŽFig. 1H. and which shows no patterns is that
the exact specification of the equation generating the time series
data is known. This is the logistic difference Eq. Ž1.. Since the
exact specification of the equation is known, there are no mea-
surement errors. In empirical applications, however, the equation
of the dynamic process generating the time series data is not
known.
480 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
considered to be a subset of the n-dimensional space.
The basic idea is to cover the attractor with volume
elements of certain size, such as hypercubes with
edge length, d. The measure is obtained from the
correlations between random points on the attractor.
The mathematical intuition underlying the estimation
of correlation dimension is best understood by form-
ing m-histories from a data set of time series obser-
vations  a t 4 , t s 1, . . . , T. m can be interpreted as
the dimension of the phase space that is being recon-
structed, and is commonly referred to as the ‘embed-
ding dimension.’For example, if m s 1,
X t1 s w a t x
Likewise, if m s 2,
X t2 s w a t ,a tq1 x
More generally, the vectors in m-dimensional phase
space with an embedding lag t can be represented
by
X tm s w a t ,a tq t ,a tq2 t , . . . ,a tqŽ my1.t x
Due to the exponential divergence of trajectories,
most pairs Ž X km , X jm . with k / j will be dynamically
uncorrelated pairs of essentially random points.
However, since the points lie on the attractor, they
will be spatially correlated. This spatial correlation is
measured with the correlation integral:
1 mension, nm ), of the attractor ŽMizrachi and Grass-
Cm Ž d . s lim
N™ ` N2
number of pairs Ž k , j . whose distance < X km y X jm <
= ½ is less than d,k / j
where,CmŽP. is the correlation integral; m is the
embedding dimension; d is the edge length of the
hypercubes defined by the researcher Žalso known as
the ‘tolerance distance’.; N is the number of time
series observations; X km is the k-th m-dimensional
vector in the phase space; X jm is the j-th m-dimen-
sional vector in the phase space.
The correlation integral can be interpreted as the
probability that, out of all possible choices, a given
number of distances are within the tolerance dis-
tance, d. Grassberger and Procaccia Ž1983. have
shown that for small values of d the correlation
integral grows as a power:
Cm Ž d . ; d n m Ž 6.
where,
nm s correlation exponent, m s 1, . . . ,n.
Taking natural log of both sides of Eq. Ž6., we
obtain:
lnCm Ž d . s bm q nm ln d Ž 7.
where,
bm s a constant.
Ž 2. For large values of d, all m-histories will be compa-
rable, the value of correlation integral will be one,
and the correlation exponent will be zero. For d less
Ž 3. than the smallest distance between m-histories, the
value of the correlation integral will be zero, and the
correlation exponent will be infinite. Thus, a plot of
ln CmŽ d . vs. lnŽ d . —also known as the GP ŽGrass-
berger and Procaccia. plot—resembles a waterfall.
In practice, one searches for a zone of stability on
Ž 4. the GP plot within which the power law fits well.
Measurement of the slope within this zone of stabil-
ity determines nm . If a process is random, nm will
continue to increase with the increasing values of m;
however, if the process is chaotic—that is, a strange
attractor is present— nm will stabilize with the in-
creasing values of m. The stabilized value of nm is
considered to be an estimate of the correlation di-
berger, 1984; Chatterjee and Yilmaz, 1992.. In this
study, we used SPECTRUM, 6 a dynamical systems
5 analysis software, for computing the correlation ex-
ponents.
Ž 5.
4.2.1.2. Shuffle diagnostic. While numerous experi-
ences with the correlation dimension as a diagnostic
for chaotic behavior are reported in the natural sci-
ence literature, no formal statistical theory seems to
exist. Hence, with small and noisy data sets 7 that
6
SPECTRUM is available from Professor Tse-min Lin, De-
partment of Government, The University of Texas at Austin,
Austin, TX 78712, USA.
7
For more details on statistical properties of dimension calcula-
tions using small data sets, see Ramsey and Yuan Ž1989, 1990..
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
are common in empirical studies in economics and
management caution must be exercised when the
algorithm of Grassberger and Procaccia Ž1983. is
used to estimate correlation dimension. Brock and
Sayers Ž1988. have proposed a data diagnostic ap-
proach—viz. shuffle diagnostic—to address the
problems associated with estimating correlation di-
mension using small and noisy time series data sets.
The intuition behind this approach is that if the data
under examination has a hidden structure—such as
the presence of a strange attractor—then random
shuffling will destroy this hidden structure. Empiri-
cally, this implies that when the data are from a
chaotic process where a strange attractor is present,
the correlation exponent, nm , will stabilize as the
embedding dimension, m, is increased; however,
after the data are shuffled randomly, the hidden
structure will be destroyed, and nm will continue to
increase as m is increased.
4.2.2. LyapunoÕ exponents
Sensitive dependence on initial conditions is a
feature that makes chaotic processes manifest behav-
ior that appears to be random. As noted earlier,
sensitive dependence on initial conditions means that
small change in the state of a process will grow at an
exponential rate and will dominate the process be-
havior. Estimation of Lyapunov exponents is a com-
monly used method for detecting sensitive depen-
dence on initial conditions. Lyapunov exponents are
the time average exponential rates of divergence or
convergence of the nearby orbits in the phase space.
Since nearby time paths correspond to nearby identi-
cal states, exponential divergence of time paths means
that processes whose initial differences we may not
be able to resolve will soon behave quite differently,
and the predictive ability will be rapidly lost. Time
series data from a process may possess any number
of Lyapunov exponents, but to confirm sensitive
dependence on initial conditions we only need to
show that the dominant Žlargest. exponent is positive
—the larger the exponent, the more chaotic the
system. While positive Lyapunov exponents are
characteristic of sensitive dependence on initial con-
ditions, zero exponents characterize a marginally
stable process, and negative exponents characterize a
periodic process. We use the well-known algorithm
481
proposed by Wolf et al. Ž1985. to estimate Lyapunov
exponents.
4.2.2.1. Estimation of LyapunoÕ exponents. The
mathematical intuition underlying the algorithm of
Wolf et al. Ž1985. is best understood by considering
a continuous dynamical system in an n-dimensional
space. The long term evolution of an infinitesimal
n-sphere of initial conditions is monitored as it be-
comes an n-ellipsoid. The i-th one-dimensional Lya-
punov exponent is then defined in terms of the
length of the ellipsoidal principal axis:
1 pi Ž t .
l i s lim log 2 Ž 8.
t™` t pi Ž 0 .
where, l i is the i-th one-dimensional Lyapunov
exponent, i s 1, . . . ,n; pi Ž t . is the length of the i-th
ellipsoidal principal axis at time, t.
As Feichtinger and Kopel Ž1993. Žp. 155. note,
Lyapunov exponents measure ‘‘the average rates of
contraction or expansion on an entire attractor’’. In
this study we used a computer program, FET ŽFixed
Evolution Time., to compute the Lyapunov expo-
nents. FET is a more efficient version of the com-
puter program that first appeared in Wolf et al.
Ž1985.. 8
5. Research setting
A wafer fabrication plant of a US merchant semi-
conductor manufacturing firm is the high technology
manufacturing plant that served as the research site
for this study over a 125-week period. In a wafer
fabrication plant, ‘‘the equipment changes fre-
quently; new manufacturing processes are introduced
frequently; existing technologies are improved
through process development; and new products are
introduced on new and continuously improving tech-
nologies’’ ŽSchoonhoven and Jelinek, 1990, p. 106..
We considered the wafer fabrication plant to be an
ideal research site for this study because it is a
8
FET is available from Professor A. Wolf, Department of
Physics, The Cooper Union, 51 Astor Place, New York, NY
10003, USA.
482 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
natural setting for multiple and ongoing innovation
implementation.
The operations of a wafer fabrication plant is
probably the ‘‘most complex’’ manufacturing pro-
cess in the world today ŽChen et al., 1988, p. 203..
The changes in equipment, processes and products,
just alluded to, and the interactions between these
changes contribute toward the increasing complexity
of wafer fabrication operations ŽCooper et al., 1992..
In addition, there are two other sources of complex-
ity. First, there is the extremely broad spectrum of
the knowledge base underlying the production tech-
nologies. Specialists in crystallography, metallurgy,
ceramics, physics, chemistry, electronic engineering,
mechanical engineering, and other areas all con-
tribute to the semiconductor knowledge base. The
second additional source of complexity is the rapid
speed with which new discoveries are quickly chan-
neled into products and manufacturing processes.
There are armies of ingenious physicists, engineers,
designers, and manufacturing specialists who regu-
larly conspire to find ways to push the technology,
and expand the envelope of the possible ŽJelinek and
Schoonhoven, 1990..
At our research site, the raw material that served
as the input to the plant were wafers. A wafer is a
slice of polished silicon disc; the diameter of wafers
used in the plant was 6 in. The output of the plant
was a broad array of memory dice Žpotential inte-
grated circuits; die is singular, and dice is plural.
with changing designs. These memory dice were of
nonvolatile EPROM ŽElectrically Programmable
Read Only Memory. type, ranging from 256 K to
2-mega-bit. A ROM ŽRead Only Memory. device is
one in which the programmed information is stored
in the memory, and only the read operation is per-
formed. Examples of ROM applications include
look-up tables and code-conversion systems.
EPROMs are ROM devices that are electrically pro-
grammable, but can be erased with ultraviolet light.
‘Nonvolatile’ refers to the type of semiconductor
memories that can stand power failure or be stored
and shipped without being energized all the time.
Some of the EPROM device types produced in the
plant were considered to be among the best in the
industry. The plant manager had once remarked:
‘‘The company has leading market share of 1-mega-
bit devices and we are rapidly expanding upwards’’.
In terms of physical layout, the plant consisted of
hundreds of interrelated steps that were spread over
several different basic processes—brief description
of the key process steps is presented in Appendix A.
The steps were mostly conducted on automated com-
puter controlled machines. Each step included a
combination of mechanical, chemical and physical
activities that required extraordinary, microscopic
precision to submicron geometries. If any step in the
process chain deviated from the specification, most
other steps were affected, often in unpredictable
ways. The production environment was extremely
clean 9 because the operations that were performed
on the wafers included etching and depositing very
fine, carefully controlled patterns of specific chemi-
cal compounds on the wafer surface. A flaw in any
processing step, or contamination of the production
environment would result into a defective final prod-
uct which could not be reworked; when something
went wrong at any step, all the previous work was
wasted. The physical flow of materials in the plant is
best described as re-entrant flow of material, i.e.,
machines are divided into disjoint banks, each prod-
uct has a unique sequence of operations, and each
product sequence requires repeated visits to each tool
bank ŽDietrich, 1991..
During the 125-week study period in 1988–1990,
the two major process technologies used in the plant
to produce dice from wafers were NMOS ŽNegative
Metal Oxide Semiconductor. and CMOS ŽComple-
mentary Metal Oxide Semiconductor. technologies.
Common to the devices produced by the MOS ŽMetal
Oxide Semiconductor. technologies are three elec-
trodes—a source which emits electrical carriers; a
drain which collects the carriers emitted by the
source; and a gate which controls the amount of
carriers flowing from the source to the drain. NMOS
technology produces devices in which the active
carriers are electrons flowing between an NŽnega-
tive.-type source and an N-type drain in an electro-
statically formed N-channel in a PŽpositive.-type sili-
9
The cleanliness class of the production environment was
Class 10, as per the federal standard 209 ŽFS 209.. This standard
is released by the US General Service Administration. The numer-
ical value of the class refers to the maximum number of particles
greater than 0.5 m mrft 3 of air.
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
Fig. 3. Transition from Negative Metal Oxide Semiconductor ŽNMOS. technology to Complementary Metal Oxide Semiconductor ŽCMOS.
technology in the wafer fabrication plant during the study period. Ž% Technology refers to the percentage of wafers released in a given week
to be processed by NMOS and CMOS technologies, respectively..
con substrate. CMOS technology produces devices
that incorporate both P-channel and N-channel struc-
tures within the same silicon substrate.
As shown in Fig. 3, the 125-week study period
represented a time-window during which there was a
transition going on from the NMOS technologies to
the CMOS technologies. There were also upgrades
within each of these two process technologies—5
upgrades for the NMOS, and 2 upgrades for the
CMOS—during this period. The transition from the
NMOS to CMOS technologies was consistent with
the general technology trend in the semiconductor
industry. CMOS was becoming the dominant tech-
nology of choice across all products by the late
1980s. The relative complexity Žmeasured by the
number of processing steps. of CMOS technology
was higher than the NMOS technology. However, its
popularity was growing because of Ži. the inherent
low power capability of CMOS devices, Žii. their
simple circuit design, and Žiii. the availability of
special features on CMOS technology ŽEl-Mansy
and Siu, 1988, pp. 238–239..
Due to the ongoing transition from NMOS to
CMOS technologies, and the ongoing upgrades
within the two process technologies, the 125-week
study period was an ideal time-window for examin-
ing the innovation implementation process in a natu-
ral setting. Throughout the study period we noticed a
constant pressure to improve manufacturing produc-
483
tivity, i.e., to efficiently manufacture high volumes
of continuously changing set of dice with changing
process technologies. Our review of the 125 weekly
production reports 10 of the plant suggested ongoing
exploitative and exploratory activities in the plant.
Exploitative-activities included de-bugging of new
equipment and processes, and modification of equip-
ment to reduce machine downtime, unit processing
times, contaminants, wafer handling, wafer breakage
or scratches. ‘Corrective action teams’ were formed.
These teams comprised of operators, engineers and
vendor representatives who were empowered to ad-
dress operational problems in the plant. A ‘stretch
goal program’ was implemented that set ambitious
goals for quality improvement and production vol-
umes, and in turn forced extensive planning and
coordination across different functional areas in the
plant.
Exploratory-activities included experimentation
with process technologies aimed at achieving supe-
rior functional performance from new die designs
introduced in the plant, and also reducing the vari-
ability in the quality of the dice manufactured in the
10
These were one-page reports which summarized the plant’s
production status in a given week. Besides quantitative production
data, the reports contained qualitative comments on the state of
operations in the plant.
484 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
plant. A ‘paperless fab project’ was initiated that
aimed at eliminating several hundred pieces of paper
involved in the production processes and allow the
operators to use touch screen interfaces and bar code
readers to collect data for computer input. A ‘cell
project’ was implemented allowing computers and
equipment to interface without the need for operator
intervention.
6. Empirical analysis
The research question guiding the empirical anal-
ysis is: Is innoÕation implementation in high tech-
nology manufacturing a chaotic process? The unit
of analysis for conducting the empirical analysis is
the plant. From a methodological standpoint, the
objective is to examine whether the time series data
that are realizations of the innovation implementa-
tion process in the wafer fabrication plant during the
125-week study period exhibit the two fundamental
properties of chaotic behavior: Ži. the presence of a
strange attractor, and Žii. sensitive dependence on
initial conditions. To this end, first, we discuss the
time series data collected from the wafer fabrication
plant. Second, we outline the steps in data analysis.
Finally, we present the results of the data analysis.
6.1. Data
The implementation phase represents the first op-
portunity to regulate an innovation; hence, the data
on plant performance collected during innovation
implementation are monitored carefully by the man-
agers ŽGerwin and Kolodny, 1992.. Problems in the
innovation implementation process, e.g., failure to
integrate advanced equipment and systems fully into
production—directly affect quality, flexibility, and
productivity of a plant ŽTyre, 1991..
At the wafer fabrication plant managers routinely
analyzed performance data to gain insights into the
process of innovation implementation. Our examina-
tion of the plant’s weekly production reports re-
vealed that data on overall plant quality, flexibility,
and productivity—viz. yield, cycle time and activi-
ties—were reported regularly. Accordingly, we use
the two diagnostic approaches—estimation of corre-
lation dimension and Lyapunov exponents—to ana-
lyze the time series data on yield, cycle time, and
activities. From the standpoint of research design,
analyzing three separate realizations of the innova-
tion implementation process in the plant will allow
us to triangulate the results from two separate analy-
ses to empirically test the conceptualization of inno-
vation implementation in high technology manufac-
turing. Following is a description of the three met-
rics.
6.1.1. Yield
It is the ratio of good dice actually produced as a
proportion of maximum number of good dice possi-
ble from the wafers released in the plant during a
given time period. Data for calculating yield were
collected at the ‘wafer probe’ operation. 11 Yield is
sensitive to the changes in design of products and
processes, and operational practices. Fluctuations in
quality, observed as variations in yield, are common
when new products, processes and operational prac-
tices are introduced in a plant. We found that man-
agers and engineers at the plant monitored this met-
ric quite closely, and used it to regulate the imple-
mentation of innovations. For the empirical analysis,
we use weekly plant level data on yield—the vol-
ume-weighted average of the yields of different types
of dice in the product portfolio in a given week.
6.1.2. Cycle time
It is the length of time elapsed from when a lot of
wafers is released into the plant until the time dice
exit from the ‘wafer probe’ operation. This metric
includes the time elapsed to complete all operations
on the wafer lot, namely, the processing time, wait-
ing time, and transport time. Cycle time is a surro-
gate measure for plant flexibility. According to the
firm’s senior vice-president of the programmable
product group,
‘‘Cycle time reduction shortens company’s response
time, thus enabling plants to build the right quantity
of right products at the right time’’.
11
‘Wafer probe’ is the final processing step in the plant. This is
the step where each die on the wafer is electrically tested. See
Appendix A for abbreviated descriptions of the key process steps
in the wafer fabrication plant.
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
Fig. 4. 123-Week yield data.
Cycle time is also considered to be critical for
managing innovation implementation in the plant.
The same senior vice-president had also observed:
‘‘It wcycle time datax allows you to learn more
quickly, which is probably the most important advan-
tage. If cycle time is short, more experiments on new
productrprocess designs can be produced, tested and
analyzed in the plant on a timely basis’’.
For the empirical analysis, we use weekly plant
level data on cycle time—the volume-weighted aver-
age of the cycle times of different wafer lots in the
product portfolio for a given week.
6.1.3. ActiÕities
A unit activity is defined as the processing of one
wafer through one machine stage. Manufacturing
productivity in a given time period is measured as
the total number of activities accomplished, i.e., the
total number of wafers processed through each ma-
chine stage. 12 As noted earlier, there was constant
pressure at our research site to improve productivity,
i.e., to efficiently manufacture high volumes of con-
tinuously changing set of dice with changing process
technologies. For a high volume wafer fabrication
operations, such as our research site, data on activi-
ties is used by managers to gain insights into the
process of innovation implementation during ‘pro-
duction ramp-up’, i.e., attaining high volume reliable
485
and replicable production. For the empirical analysis,
we use weekly data on the total number of activities
performed in the plant in a given week.
The data on yield, cycle time, and activities were
collected from the plant’s weekly production reports
for 125 consecutive weeks of the study period. Dur-
ing these 125 weeks there were two 1-week plant
shutdowns for yearly preventive maintenance; effec-
tively, we have time series data for 123 weeks on the
three performance metrics of the plant. Figs. 4–6 are
plots of the 123-week data on yield, cycle time, and
activities for the plant.
6.2. Steps in the data analysis
A common problem encountered in analyzing time
series data for the purpose of detecting chaotic be-
havior is autocorrelation. Autocorrelated randomness
12
Measuring manufacturing productivity as the total number of
wafers processed in the plant in a given time-period is inappropri-
ate because the number of machine stages through which wafers
are processed vary by the type of dice to be produced. Complex
dice require that the wafers be processed through many more
machine stages than the simple dice. Using ‘activities’ as the
measurement unit makes it possible to compute manufacturing
productivity even across diverse and noncomparable dice pro-
duced in a given time period. See Kaplan Ž1985. Žpp. 213–218.
for more details.
486 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494

Fig. 5. 123-Week cycle time data.

can be easily confused with chaos. The ‘residual
test’ documented in Brock Ž1986. and Brock and
Sayers Ž1988. is a means to address this problem.
This involves fitting a plausible model to the time
series data, and analyzing the residuals using the
diagnostics for detecting chaotic behavior. According
to Brock and Sayers Ž1988. Žp. 78., ‘‘if a time series
 a t 4 , t s 1, . . . ,T, has a deterministic explanation and
you fit a smooth time series model, then the residuals
 ´ t 4 , t s 1, . . . ,T, of that model must have the same
largest Lyapunov exponent and the same correlation
dimension as  a t 4 ’’. The application of residual test
has now become a routine procedure in studies aimed
at detecting chaos in time series data Žsee Sayers,
1990; Cheng and Van de Ven, 1996.. Accordingly,
we initiate the data analysis by fitting time series
models to the data sets on yield, cycle time, and
activities, respectively. For each one of the best-fit-
ting time series models, we examined the residuals
Žwhich have been declared to be white noise, i.e.,

Fig. 6. 123-Week activities data.

 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494 487

Fig. 7. Steps in the data analysis for testing chaotic properties of a dynamic process.

they are independent and identically distributed based
on the standard statistical tests. to determine if they
exhibit chaotic behavior.
As shown in Fig. 7, following are the steps in the
data analysis.
Step 1. Collect time series data on the metrics
Žyield, cycle time, and activities. that are realizations
of the dynamic process under investigation Žinnova-
tion implementation in high technology manufactur-
ing..
Step 2. Make the data time-stationary 13 and esti-
mate the best-fitting ARIMA model for the station-
ary data set Žon yield, cycle time, and activities.. An
ARIMA model is defined by three parameters—p,
d, q—and is usually denoted by the notation ARIMA
Ž p, d, q .. p and q, respectively, indicate the number
of autoregressive and moving average parameters in
13
The two conditions for stationarity of a time series data are:
Ži. the mean and variance do not change with historical time, and
Žii. the autocovariance structure is independent of historical time.
In practice, stationarity of a time series data is checked by
observing the autocorrelation function. If the data are stationary,
the autocorrelation function should rapidly decay to zero.
488 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494

Table 1
Estimation of the best-fitting ARIMA models Ž t-statistics in parentheses.
Yield ARIMA Ž2,1,3. DlnYLDt s y0. 54 DlnYLDty1 y 0. 89 DlnYLDty2 q c t y 0. 22 c ty1 q 0. 20 c ty2 y 0. 86 c ty3
Ž2.51 . Ž2.29 . Ž10.57 . Ž8.14 . Ž15.92 .
where, YLDt s yield, and c t s yield residuals.
AIC s y119.16; Standard error estimates 0.14; N s 123.

Cycle time ARIMA Ž0,1,1. DlnCYCTt s x t y 0. 46 x ty1

Ž5.62 .
where, CYCTt s cycle time, and x t s cycle time residuals.
AIC s y175.69; Standard error estimates 0.12; N s 123.

Activities ARIMA Ž2,1,0. DlnACTt s y0. 44 DlnACTty1 y 0. 39 DlnACTty2 q a t

Ž4.66 . Ž4.67 .
where, ACTt s activities, and a t s activities residuals.
AIC s y126.41; Standard error estimates 0.14; N s 123.

the model; d indicates how many times the original Step 5. Compute Lyapunov exponents for the
time series data are differenced to make it stationary. original residuals of the best-fitting ARIMA model
The usual criteria are used to select the best-fitting Žfor yield, cycle time, and activities.. If the dominant
model. These include stationarity, parameter signifi- Žlargest. Lyapunov exponent is positive, then it sug-
cance, diagnostic checks of the residuals exhibiting gests that the dynamic process exhibits sensitive
white noise characteristics, and minimization of the dependence on initial conditions; zero exponents
Akaike Information Criterion ŽAIC.. The residuals suggest a marginally stable time path, and negative
corresponding to the best-fitting ARIMA model Žfor exponents suggest a periodic time path.
yield, cycle time, and activities. are collected and A dynamic process is considered to be chaotic
saved. when there is empirical support for both the pres-
Step 3. Randomly shuffle the residuals corre- ence of a strange attractor and sensitive dependence
sponding to the best-fitting ARIMA model Žfor yield, on initial conditions.
cycle time, and activities. and save them separately.
Step 4. Compute correlation exponents 14 for dif- 6.3. Results
ferent embedding dimensions—in an ascending or-
We analyzed the three sets of time series data on
der, starting from m s 1,2, . . . , and so on—using Ži.
yield, cycle time and activities following the steps
the original residuals of the best-fitting ARIMA
model, and Žii. its corresponding randomly shuffled
Table 2
counterpart. If the correlation exponents for the orig- Estimates of correlation exponents for embedding dimensions,
inal residuals stabilize with increasing embedding ms1 to 5, for the original residuals from the best-fitting ARIMA
dimension, then it suggests that a strange attractor is models, and for the randomly shuffled residuals
present. However, if the correlation exponents con- Original ARIMA residuals Embedding dimension Ž m.
tinue to increase with increasing embedding dimen- 1 2 3 4 5
sion, as would be the case for the randomly shuffled Yield 0.95 1.63 1.90 2.68 2.70
residuals, then it suggests that a strange attractor is Cycle time 0.94 1.59 1.93 2.44 2.44
not present and original time series data set is the Activities 0.86 1.48 1.90 2.15 2.15
realization of a random process.
Shuffled ARIMA residuals Embedding dimension Ž m.
1 2 3 4 5
14
Since we are analyzing ARIMA residuals, we use an embed- Yield 0.73 1.77 2.55 3.11 4.31
ding lag, t s1; see Eq. Ž4.. The embedding lag is estimated as the Cycle time 0.67 1.31 2.15 2.56 3.34
smallest value of lag for which the autocorrelation function is Activities 0.65 1.92 2.65 3.41 3.84
approximately equal to zero ŽKaplan and Glass, 1995, p. 322..
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494 489

Table 3 as the embedding dimension is increased from 1 to 5.

Estimates of dominant Žlargest. Lyapunov exponents for the origi- This indicates that a hidden structure in the form a
nal residuals from the best-fitting ARIMA models
strange attractor did exist, but was destroyed after
Original ARIMA Best-fitting ARIMA Dominant
the residuals were shuffled randomly. 15
residuals models Lyapunov exponent
Following step 5 in Fig. 7, Lyapunov exponents
Yield ARIMAŽ2,1,3. 0.1261
were estimated for the original residuals correspond-
Cycle time ARIMAŽ0,1,1. 0.0766
Activities ARIMAŽ2,1,0. 0.0758 ing to each of the three best-fitting ARIMA models.
As shown in Table 3, the dominant Žlargest. Lya-
punov exponents in all three cases are positive,
suggesting that the dynamic process under investiga-
tion exhibits sensitive dependence on initial condi-
outlined in Fig. 7. Following step 2, all three original
tions.
time series data sets were made stationary by taking
All in all, the above results indicate both the
first logarithmic difference, Dln x t s ln x t y ln x ty1 ,
presence of a strange attractor and sensitive depen-
where x t is the original observation at time t, and ln
dence on initial conditions in the residuals of the
is the natural logarithm. We then used the ARIMA
three time series models fitted, respectively, to the
procedure of SAS Institute Ž1988. to obtain the
123-week data on yield, cycle time, and activities. In
following best-fitting models: ARIMA Ž0,1,1. for
summary, there is empirical support for the concep-
cycle time; ARIMA Ž2,1,3. for yield; ARIMA Ž2,1,0.
tualization of innovation implementation in high
for activities. The residuals of each of the fitted
technology manufacturing as a chaotic process.
models exhibited properties of white noise, and
Ljung-Box Q-statistics at various lags implied an
adequate model fit for all three cases. Table 1 con-
tains the equations, parameter estimates, and the 7. Conclusion
relevant statistics for the three best-fitting ARIMA
models.
Following step 4 in Fig. 7, we estimated the 7.1. Summary
correlation exponents corresponding to the original
sequence of residuals of the three time series models.
Our purpose of undertaking this study was to shed
As shown in the top-half of Table 2, the correlation
light into the process of innovation implementation
exponents in all three cases stabilize as the embed-
—the least understood aspect of the overall innova-
ding dimension is increased from 1 to 5. This sug-
tion process after more than four decades of research
gests that a strange attractor is present. In the bot-
on innovation ŽRice and Rogers, 1980; Van de Ven,
tom-half of Table 2, we report the correlation expo-
1993; Klein and Sorra, 1996.. We focused our inves-
nents for the residuals after their original sequence
tigations on innovation implementation in high tech-
was randomly shuffled. In all three cases, we ob-
nology manufacturing, a natural setting for multiple
serve that the correlation exponents keep increasing
and ongoing innovation implementation, to ensure
that this study complements earlier studies on inno-
vation implementation where the implementation
15 process was investigated one-innovation-at-a-time.
Following Kaplan and Glass Ž1995. Žp. 342., we also tested
the ‘‘linear-dynamics null hypothesis’’, i.e., the dynamics of the
Building on the developments in organizational
time series data is linear with Gaussian white noise. This hypothe- learning theory, we framed the process of innovation
sis is inconsistent with chaotic behavior as linear dynamics cannot implementation in high technology manufacturing as
produce chaos. We tested the linear-dynamics null-hypothesis by a problem of balancing between exploitation and
phase-shuffling the residuals corresponding to the ARIMA models exploration. We obtained insights into the dynamics
for yield, cycle time and activities. For all three sets of phase-
shuffled residuals data, the correlation exponent continued to
of balancing between exploitation and exploration
increase with increasing embedding dimension. Thus, the linear- with the aid of a logistic difference equation, and
dynamics null hypothesis was rejected. showed that innovation implementation in high tech-
490 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
nology manufacturing can be conceptualized as a
chaotic process, in a scientific sense. Through the
application of diagnostic techniques from chaos the-
ory, we empirically tested this conceptualization by
analyzing time series data from a wafer fabrication
plant—the high technology manufacturing plant that
served as our research site over a 125-week period.
We found empirical support for the conceptualiza-
tion of innovation implementation in high technol-
ogy manufacturing as a chaotic process.
7.2. Contributions
At an intuitiÕe level, the two fundamental proper-
ties of chaotic behavior— Ži. the presence of a strange
attractor, and Žii. sensitive dependence on initial
conditions—have been alluded to separately in ear-
lier studies on innovation implementation. As we
discussed earlier, the findings of the case studies of
Jelinek and Schoonhoven Ž1990. seemed to indicate
the presence of a strange attractor. The findings of
the case studies of Tyre and Orlikowski Ž1994. along
with the characterization of the innovation imple-
mentation process of Weick Ž1990. seemed to indi-
cate sensitive dependence on initial conditions. To
the best of our knowledge, this is the first study that
Ži. provides a theoretical foundation for chaotic be-
havior of the innovation implementation process, and
Žii. empirically examines, and finds support for the
two properties of chaotic behavior. Thus, this study
contributes to the research on innovation implemen-
tation by providing a conceptual basis for integrating
the findings of earlier studies, and adding rigor to
this stream of research.
After reviewing studies on managing high tech-
nology organizations, Mohrman and Von Glinow
Ž1990b. Žp. 294. concluded that ‘‘the field is rich
with anecdotal and case based research’’, and recom-
mended ‘‘it is time to go beyond this type of
methodology, for as any scientific inquiry proceeds,
it alters its lens from qualitative to quantitative anal-
yses’’. The demonstrated application of diagnostic
techniques from chaos theory for conducting quanti-
tatiÕe analysis of time series data and testing the
conceptualization of innovation implementation as a
chaotic process is a contribution of this study toward
advancing the research on managing high technology
organizations.
7.3. Managerial implications
From a managerial standpoint, this study provides
insights on one hand, and raises questions on the
other hand. The key insight associated with framing
innovation implementation in high technology manu-
facturing as a problem of balancing between ex-
ploitation and exploration, and finding empirical sup-
port for the presence of a strange attractor, is that it
is possible to simultaneously engage in exploitative
and exploratory activities in a manufacturing envi-
ronment, and also maintain a balance between these
two types of activities. This insight raises the follow-
ing questions: How should the personnel in a plant
be encouraged to engage in both exploitative and
exploratory activities? How should the balance be-
tween exploitative and exploratory activities in a
plant be maintained?
The fact that the process of innovation implemen-
tation exhibits sensitive dependence on initial condi-
tions suggests that the earliest stages of the imple-
mentation process are extremely important. Minor
differences in the earliest stages of the implementa-
tion process can result into significantly large differ-
ences in the potential of the innovations realized in
the long term. This insight raises the following ques-
tions. Who should be involved in exploitation, or
exploration, or both, and for how long?
7.4. Directions for future research
The primary limitations of this research are that it
is a longitudinal field study of one plant, and the
empirical analysis is based on secondary data. Hence,
there are at least two logical directions of future
research. First, there is a need to continue investiga-
tions aimed at conceptualizing the process of innova-
tion implementation. Such studies should also be
longitudinal field studies based in other high technol-
ogy manufacturing settings. However, the empirical
analysis should be conducted using primary data on
the innovation implementation process. Second, there
is a need to develop and validate models that capture
the dynamics of the innovation implementation pro-
cess. The purpose of such models should be to
improve managerial decision making pertaining to
specific questions about the innovation implementa-
 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
tion process. In closing, we believe that this study
provided fresh theoretical and methodological per-
spectives into the process of innovation implementa-
tion and will motivate other scholars and practition-
ers to pursue this line of inquiry.
Acknowledgements
This study is supported by a grant from Advanced
Micro Devices and the Grant-in-Aid of research
from the University of Minnesota. We acknowledge
the assistance of Warren Hastings, Jim Macek, Jack
Smith and Paul Steele in collecting the data and
related information for this study. We thank Alan
Wolf and Tse-Min Lin for providing us with the
softwares used to analyze the data. We are grateful
to Rajiv D. Banker, Kim Bates, Kevin J. Dooley, Joy
M. Field, Paul E. Johnson, Inder S. Khosla, James G.
March, Christopher J. Nachtsheim, Douglas Polley,
Claudia B. Schoonhoven, Roger G. Schroeder,
Michael J. Stutzer and Andrew H. Van de Ven for
their help and advice during the study, comments on
earlier versions of the paper, or both.
Appendix A. The key process steps in the wafer
fabrication plant
Following are abbreviated descriptions of the key
process steps in the wafer fabrication plant through
which the silicon wafers were processed into dice.
Depending on the type of dice, there were variations
in both the number and sequence of the steps. For
detailed technical descriptions of the steps, see Rab-
bat Ž1988..
A.1. Epitaxy
This is the process that grows a substrate crys-
talline structure on the polished surface of the wafer
to obtain the precise electrical characteristics desired.
Epitaxy is a useful means of employing a general-
purpose wafer substrate as the basis for a multitude
of tailored silicon layers. These layers are the locus
of the dice produced in the subsequent steps.
491
A.2. Photolithography
This is the process through which circuitry is
produced on the wafer. First, a mask or master
pattern of circuitry is prepared on a glass plate. The
pattern is magnified several hundred times and
checked and rechecked, and then reduced to final
size using special cameras. The line of the final
patterns are about 1 m or less. A typical circuit may
contain many thousands of such lines. Absolute ac-
curacy is required, as any errors will be reproduced
on the dice. Step-and-repeat cameras are used to
reproduce the master circuitry pattern many times to
mass produce copies of the pattern on wafers. Next,
the wafer is spread with a photosensitive material
Žcalled photoresist., which is dried and then exposed
to ultraviolet light through the mask. The pattern is
developed, and unexposed areas of resist removed.
The silicon dioxide in unexposed areas of the wafer
is then chemically etched away, and the remaining
resist is removed. What remains is a carefully de-
fined pattern of insulating silicon dioxide on the
wafer.
A.3. Diffusion
During this process the patterned wafer is diffused
with a dopant—an element which, when incorpo-
rated in the semiconductor material strongly en-
hances its ability to conduct electricity. Diffusion
occurs in a controlled atmosphere and at high tem-
peratures. The dopants diffuse into the unprotected
areas of the wafer in a predictable fashion, with the
diffusion concentration determined by the atmo-
spheric concentration of the dopant, and the diffusion
depth determined by the exposure time, both of
which need to be precisely controlled. Since dopants
diffuse slowly into silicon oxide, hence oxide cov-
ered areas are protected against diffusion.
A.4. Ion implantation
This is the process through which the dopants are
introduced by directing a high energy stream of
dopant atoms at the wafers in a vacuum. Both the
number of atoms introduced and their depth of pene-
tration has to be carefully controlled.
492 S. Jayanthi, K.K. Sinha r Journal of Operations Management 16 (1998) 471–494
A.5. Metalization
This is the process by which various portions of
the circuit are connected to one another. The usual
means of connection is metal. Aluminum and gold
are the metals that are commonly used. Typically, a
thin layer of metal is evaporated on to the surface of
the wafer in a vacuum. Unneeded portions of the
metal film are etched away, leaving behind the pat-
tern of metal required to establish the desired con-
nections.
A.6. Layering
This is the process by which repeated layers of
silicon dioxide, metal, silicon and various dopants
are constructed on atop another to create the memory
dice.
A.7. Mechanical protection
This is the process by which a layer of deposited
glass or quartz is added with appropriate openings
for leads to connect with the dice. This layer pro-
vides mechanical protection of the semiconductor
surface.
A.8. Wafer probe
This is the process during which each die on the
wafer is electrically tested. Defective dice are dis-
carded before further processing. The defective dice
are identified by a dot of ink, so that they can easily
be set aside after the wafer is separated into dice.
Wafer probe was the final processing step at our
research site. Further downstream operations such as
assembly and packaging were conducted in offshore
plants located in South-East Asia.
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