The Qwerty Phenomenon: Its Relevance In A World With Creative Destruction

Does quality always win? Looking at the critical drivers of success in and efficiency of high-tech markets, two contrasting perspectives exist in the academic sector. One camp argues that the higher quality of a product or service exerts a major influence on its market success. Consequently, an inferior market player should not persist. The opposite group emphasises the importance of network effects, which can lead to lock-ins in inferior situations or being stuck in a bad equilibria accordingly, also known as the QWERTY phenomenon. In this paper, we investigate this debate. We demonstrate that the missing consideration of the status quo bias in previous studies leads to the rejection of the QWERTY phenomenon, which means that independent of the quality offered by a business or service the pure moment of who reaches the customer first, establishes a status quo from which it is hardly possible to escape. We give several examples with inferior market leaders. We suggest that this phenomenon causes only temporary harm, and lock-ins could be overcome by Schumpeterian creative destruction. Therefore, we claim that even if lock-ins exist, they pose no problems as innovative market participants have the opportunity to introduce new business models.