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Innovative leadership: First-mover advantages in new product adoption

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  • Richard Jensen

Abstract

This paper analyzes innovation adoption when uncertainty about its profitability cannot be resolved immediately. Firms begin with a common estimate of the probability of high demand. If any adopts, all observe realized demand. An increase in the initial estimate can decrease the equilibrium number of initial adopters, because it results in higher updated estimates that can induce future adoption by additional firms that reduces the initial adoption payoff. Moreover, innovative leadership does not imply initial adoption because leadership implies a greater waiting payoff as well as a greater adoption payoff. Leadership does, however, still provide a higher expected payoff. Copyright Springer-Verlag Berlin Heidelberg 2003

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File URL: http://hdl.handle.net/10.1007/s00199-002-0263-1
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 21 (2003)
Issue (Month): 1 (01)
Pages: 97-116

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Handle: RePEc:spr:joecth:v:21:y:2003:i:1:p:97-116

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Related research

Keywords: Keywords and Phrases: Adoption; Innovation; Leadership; First-mover advantage.; JEL Classification Numbers: C73; O31; O33.;

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Cited by:
  1. David A. Miller, 2005. "Invention under uncertainty and the threat of ex post entry," Industrial Organization 0510001, EconWPA.
  2. Vedel, Suzanne Elizabeth & Thorsen, Bo Jellesmark & Jacobsen, Jette Bredahl, 2009. "First-movers, non-movers, and social gains from subsidising entry in markets for nature-based recreational goods," Ecological Economics, Elsevier, vol. 68(8-9), pages 2363-2371, June.
  3. Emmanuel Dechenaux & Brent Goldfarb & Scott A. Shane & Marie C. Thursby, 2003. "Appropriability and the timing of innovation: Evidence from MIT inventions," NBER Working Papers 9735, National Bureau of Economic Research, Inc.
  4. Emmanuel Dechenaux & Brent Goldfarb & Scott Shane & Marie Thursby, 2008. "Appropriability and Commercialization: Evidence from MIT Inventions," Management Science, INFORMS, vol. 54(5), pages 893-906, May.

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