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Strategic Innovation and Technology Adoption in an Evolving Industry

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Author Info

  • Darren Filson

    (Claremont Graduate University)

  • Richard T. Gretz

    (Claremont Graduate University)

Abstract

We introduce a racing model with multiple product generations, product innovation, spin-outs, and licensing. Industry conditions and innovation characteristics affect who wins the race and who markets the resulting product. Small firms market their innovations when they pioneer a new generation or improve quality in a young generation and license their innovations in mature generations. If old generation leaders ever market improvements in young generation goods, they do so early on. Leadership in mature generations persists. Tests on the rigid disk drive industry (1977-97) provide empirical support. The results have implications for antitrust policies and policies governing employee non-compete agreements.

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Bibliographic Info

Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2003-08.

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Date of creation: Mar 2003
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Handle: RePEc:clm:clmeco:2003-08

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Keywords: industry dynamics; employee mobility; innovation market; convenant not to compete; spin-offs;

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References

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  1. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
  2. April Mitchell Franco & Darren Filson, 2000. "Knowledge diffusion through employee mobility," Staff Report, Federal Reserve Bank of Minneapolis 272, Federal Reserve Bank of Minneapolis.
  3. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(2), pages 322-47, April.
  4. Joshua S. Cans & Scott Stern, 2000. "Incumbency and R&D Incentives: Licensing the Gale of Creative Destruction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 485-511, December.
  5. Richard J. Gilbert & Willard K. Tom, 2001. "Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later," Industrial Organization, EconWPA 0106002, EconWPA.
  6. Cockburn, Iain & Henderson, Rebecca, 1994. "Racing to Invest? The Dynamics of Competition in Ethical Drug Discovery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(3), pages 481-519, Fall.
  7. Steven Klepper & Sally Sleeper, 2005. "Entry by Spinoffs," Management Science, INFORMS, INFORMS, vol. 51(8), pages 1291-1306, August.
  8. Josh Lerner, 1997. "An Empirical Exploration of a Technology Race," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 228-247, Summer.
  9. Darren Filson, 2001. "The Nature and Effects of Technological Change over the Industry Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 460-494, July.
  10. Cooper, David P., 2001. "Innovation and reciprocal externalities: information transmission via job mobility," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 403-425, August.
  11. Richard R. Nelson, 1988. "Modelling the Connections in the Cross Section between Technical Progress and R&D Intensity," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 478-485, Autumn.
  12. Filson, Darren, 2002. "Product and process innovations in the life cycle of an industry," Journal of Economic Behavior & Organization, Elsevier, vol. 49(1), pages 97-112, September.
  13. Salant, Stephen W, 1984. "Preemptive Patenting and the Persistence of Monopoly: Comment," American Economic Review, American Economic Association, vol. 74(1), pages 247-50, March.
  14. Jan Eeckhout & Boyan Jovanovic, 2002. "Knowledge Spillovers and Inequality," American Economic Review, American Economic Association, vol. 92(5), pages 1290-1307, December.
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Cited by:
  1. Roberto Fontana & Lionel Nesta, 2007. "Product Innovation and Survival in a High-Tech Industry," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2007-30, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Darren Filson & Neal Masia, 2007. "Effects of profit-reducing policies on firm survival, financial performance, and new drug introductions in the research-based pharmaceutical industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 329-351.
  3. Natália Barbosa & Ana Paula Faria & Vasco Eiriz, 2013. "Industry - and firm-specific factors of innovation novelty," NIPE Working Papers, NIPE - Universidade do Minho 10/2013, NIPE - Universidade do Minho.
  4. Kim, YoungJun & Vonortas, Nicholas S., 2006. "Technology licensing partners," Journal of Economics and Business, Elsevier, Elsevier, vol. 58(4), pages 273-289.
  5. Richard Gretz, 2010. "Console Price and Software Availability in the Home Video Game Industry," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 38(1), pages 81-94, March.
  6. Boyan Jovanovic & Chung-Yi Tse, 2010. "Entry and Exit Echoes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 514-536, July.
  7. Yim, Hyung Rok, 2008. "Quality shock vs. market shock: Lessons from recently established rapidly growing U.S. startups," Journal of Business Venturing, Elsevier, vol. 23(2), pages 141-164, March.

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