Strategic Experimentation and Disruptive Technological Change
AbstractThis paper studies the diffusion of a new technology that is brought to market while its potential is still uncertain. We consider a dynamic game in which an incumbent and a startup firm improve both a new and a rival old technology while learning about the relative potential of both technologies. The main findings are that (i) risk considerations make incumbents with higher market shares more likely to adopt the new technology and (ii) changes in market power are often preceded by a subpar performance of the new technology. We also show that introducing a better new technology or confronting a worse old technology may hurt the startup firm as its new technology is then adopted earlier by incumbents. (Copyright: Elsevier)
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 11 (2008)
Issue (Month): 2 (April)
Contact details of provider:
Postal: Review of Economic Dynamics Academic Press Editorial Office 525 "B" Street, Suite 1900 San Diego, CA 92101
Web page: http://www.EconomicDynamics.org/review.htm
More information through EDIRC
Other versions of this item:
- Schivardi, Fabiano & Schneider, Martin, 2005. "Strategic Experimentation and Disruptive Technological Change," CEPR Discussion Papers 4925, C.E.P.R. Discussion Papers.
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aaron Tornell, 1997.
"Rational Atrophy: The US Steel Industry,"
NBER Working Papers
6084, National Bureau of Economic Research, Inc.
- Aaron Tornell, 1997. "Rational Atrophy: The U.S. Steel Industry," Harvard Institute of Economic Research Working Papers 1806, Harvard - Institute of Economic Research.
- Boyan Jovanovic & Yaw Nyarko, 1994.
"Learning By Doing and the Choice of Technology,"
NBER Working Papers
4739, National Bureau of Economic Research, Inc.
- Jullien Bruno & Aghion Philippe & Paz Espinoza M, 1990.
"Dynamic duopoly with learning through market experimentation,"
CEPREMAP Working Papers (Couverture Orange)
- Aghion, Philippe & Espinosa, Maria Paz & Jullien, Bruno, 1993. "Dynamic Duopoly with Learning through Market Experimentation," Economic Theory, Springer, vol. 3(3), pages 517-39, July.
- Aghion, P. & Espinoza, M.P. & Jullien, B., 1990. "Dynamic Duopoly With Learning Through Market Experimentation," DELTA Working Papers 90-13, DELTA (Ecole normale supérieure).
- Jovanovic, B. & Macdonald, G.M., 1988.
RCER Working Papers
160, University of Rochester - Center for Economic Research (RCER).
- Jovanovic, B. & MacDonald, G.M., 1991. "Competitive Diffusion," Papers 92-08, Rochester, Business - Financial Research and Policy Studies.
- Boyan Jovanovic & Glenn MacDonald, 1993. "Competitive Diffusion," NBER Working Papers 4463, National Bureau of Economic Research, Inc.
- Macdonald, G.M., 1988. "Competitive Diffusion," University of Chicago - Economics Research Center 88-10, Chicago - Economics Research Center.
- Dirk Bergemann & Juuso Valimaki, 1996.
"Learning and Strategic Pricing,"
Cowles Foundation Discussion Papers
1113, Cowles Foundation for Research in Economics, Yale University.
- Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Scholarly Articles 12375013, Harvard University Department of Economics.
- Ariel Pakes & Paul McGuire, 1994.
"Computing Markov-Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model,"
RAND Journal of Economics,
The RAND Corporation, vol. 25(4), pages 555-589, Winter.
- Ariel Pakes & Paul McGuire, 1992. "Computing Markov Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model," NBER Technical Working Papers 0119, National Bureau of Economic Research, Inc.
- Ariel Pakes & Paul McGuire, 1992. "Computing Markov perfect Nash equilibria: numerical implications of a dynamic differentiated product model," Discussion Paper / Institute for Empirical Macroeconomics 58, Federal Reserve Bank of Minneapolis.
- Kenneth L. Judd, 2003.
"Closed-loop equilibrium in a multi-stage innovation race,"
Springer, vol. 21(2), pages 673-695, 03.
- Kenneth L. Judd, 1985. "Closed-Loop Equilibrium in a Multi-Stage Innovation Race," Discussion Papers 647, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
- Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
- Massoud Karshenas & Paul L. Stoneman, 1993.
"Rank, Stock, Order, and Epidemic Effects in the Diffusion of New Process Technologies: An Empirical Model,"
RAND Journal of Economics,
The RAND Corporation, vol. 24(4), pages 503-528, Winter.
- Karshenas, Massoud & Stoneman, Paul, 1990. "Rank, Stock, Order And Epidemic Effects In The Diffusion Of New Process Technologies : An Empirical Model," The Warwick Economics Research Paper Series (TWERPS) 358, University of Warwick, Department of Economics.
- Harris, Christopher & Vickers, John, 1987. "Racing with Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 1-21, January.
- Iansiti, Marco & Khanna, Tarun, 1995. "Technological Evolution, System Architecture and the Obsolescence of Firm Capabilities," Industrial and Corporate Change, Oxford University Press, vol. 4(2), pages 333-61.
- April Mitchell Franco & Darren Filson, 2000.
"Knowledge Diffusion through Employee Mobility,"
Claremont Colleges Working Papers
2000-61, Claremont Colleges.
- Sarah Kaplan & Fiona Murray & Rebecca Henderson, 2003. "Discontinuities and senior management: assessing the role of recognition in pharmaceutical firm response to biotechnology," Industrial and Corporate Change, Oxford University Press, vol. 12(2), pages 203-233, April.
- Jensen, Richard, 1982. "Adoption and diffusion of an innovation of uncertain profitability," Journal of Economic Theory, Elsevier, vol. 27(1), pages 182-193, June.
- Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December.
- Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
- Bhattacharya, Sudipto & Chatterjee, Kalyan & Samuelson, Larry, 1986. "Sequential Research and the Adoption of Innovations," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 219-43, Suppl. No.
- Luís M. B. Cabral, 2003. "R&D Competition when firms Choose Variance," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 139-150, 03.
- Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
- Lynne G. Zucker & Michael R. Darby, 1996. "Costly Information in Firm Transformation, Exit, or Persistent Failure," NBER Working Papers 5577, National Bureau of Economic Research, Inc.
- David Besanko & Ulrich Doraszelski, 2004.
"Capacity Dynamics and Endogenous Asymmetries in Firm Size,"
RAND Journal of Economics,
The RAND Corporation, vol. 35(1), pages 23-49, Spring.
- David Besanko & Ulrich Doraszelski, 2002. "Capacity Dynamics and Endogenous Asymmetries in Firm Size," Computing in Economics and Finance 2002 196, Society for Computational Economics.
- Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
- Budd, Christopher & Harris, Christopher & Vickers, John, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 543-73, July.
- Kevin F. McCardle, 1985. "Information Acquisition and the Adoption of New Technology," Management Science, INFORMS, vol. 31(11), pages 1372-1389, November.
- Ulrich Doraszelski & Sarit Markovich, 2004. "Advertising Dynamics and Competitive Advantage," Econometric Society 2004 North American Summer Meetings 162, Econometric Society.
- Ulrich Doraszelski & Sarit Markovich, 2004. "Advertising Dynamics and Competitive Advantage," Computing in Economics and Finance 2004 61, Society for Computational Economics.
- Aghion, Philippe, et al, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 467-92, July.
- Malerba, Franco, 2007. "Innovation and the dynamics and evolution of industries: Progress and challenges," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 675-699, August.
- Baccara, Mariagiovanna & Razin, Ronny, 2004.
"Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights,"
CEPR Discussion Papers
4466, C.E.P.R. Discussion Papers.
- Mariagiovanna Baccara & Ronny Razin, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," Levine's Working Paper Archive 122247000000000194, David K. Levine.
- Weintraub, Gabriel Y. & Benkard, C. Lanier & Van Roy, Benjamin, 2007. "Computational Methods for Oblivious Equilibrium," Research Papers 1969, Stanford University, Graduate School of Business.
- Horvath, Michael & Schivardi, Fabiano & Woywode, Michael, 2001. "On industry life-cycles: delay, entry, and shakeout in beer brewing," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1023-1052, July.
- Carlos J.Pérez & Carlos J.Ponce, 2013. "Disruption costs and the choice of technology," ILADES-Georgetown University Working Papers inv292, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
- Fabiano Schivardi, 1998.
"Reallocation and Learning over the Business Cycle,"
Temi di discussione (Economic working papers)
345, Bank of Italy, Economic Research and International Relations Area.
- Weintraub, Gabriel Y. & Benkard, C. Lanier & Van Roy, Benjamin, 2007. "Markov Perfect Industry Dynamics with Many Firms," Research Papers 1919r, Stanford University, Graduate School of Business.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.