IDEAS home Printed from https://ideas.repec.org/p/unm/umamer/2000019.html
   My bibliography  Save this paper

Product differentiation and product complexity: A conceptual model and an empirical application to microcomputers

Author

Listed:
  • Frenken, Koen
  • Windrum, Paul

    (MERIT)

Abstract

We propose a model of product technology that describes products as complex systems.Complex systems are made out of elements that function collectively according to the way theyare put together within a system’s architecture. Different choices of elements translate intodifferent levels of functional attributes and price. New variations in product design occur throughmutations at the level of elements (“genotype”) while pre-market trials and market selection occurat the level of costs and functions (“phenotype”). In this model, both vertical and horizontaldifferentiation can be represented. Vertical differentiation can be understood as stemming fromthe use of expensive elements in high-performance product designs. Horizontal differentiationcan occur when different, complementary combinations of elements yield mixes of functions eachof which is preferred by a different user group.Microcomputers provide us with an interesting example of an artefact that has evolved intodifferent varieties through a series of component innovation and recombination (Langlois andRobertson 1992). Databases on component characteristics of over 4000 different microcomputersfrom 1992 to 1997 are analysed on product and price differentiation using entropy statistics. Dataon price allow us to distinguish between variety reflecting vertical differentiation and varietyreflecting horizontal differentiation. This distinction is of importance when one wants tounderstand the diffusion of new component technologies through either product differentiation orprice differentiation. Other issues regarding modelling and measurement of complex systems arediscussed in the final section.

Suggested Citation

  • Frenken, Koen & Windrum, Paul, 2000. "Product differentiation and product complexity: A conceptual model and an empirical application to microcomputers," Research Memorandum 019, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:umamer:2000019
    as

    Download full text from publisher

    File URL: https://www.merit.unu.edu/publications/rmpdf/2000/rm2000-019.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kelvin Lancaster, 1990. "The Economics of Product Variety: A Survey," Marketing Science, INFORMS, vol. 9(3), pages 189-206.
    2. Gallouj, Faiz & Weinstein, Olivier, 1997. "Innovation in services," Research Policy, Elsevier, vol. 26(4-5), pages 537-556, December.
    3. Frenken, Koen & Saviotti, Paolo P. & Trommetter, Michel, 1999. "Variety and niche creation in aircraft, helicopters, motorcycles and microcomputers," Research Policy, Elsevier, vol. 28(5), pages 469-488, June.
    4. Henderson, Rebecca, 1995. "Of life cycles real and imaginary: The unexpectedly long old age of optical lithography," Research Policy, Elsevier, vol. 24(4), pages 631-643, July.
    5. Koen Frenken & Luigi Marengo & Marco Valente, 1999. "Interdependencies, nearly-decomposability and adaption," CEEL Working Papers 9903, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    6. Gernot Grabher & Walter W. Powell (ed.), 2004. "Networks," Books, Edward Elgar Publishing, volume 0, number 2771.
    7. Auerswald, Philip & Kauffman, Stuart & Lobo, Jose & Shell, Karl, 2000. "The production recipes approach to modeling technological innovation: An application to learning by doing," Journal of Economic Dynamics and Control, Elsevier, vol. 24(3), pages 389-450, March.
    8. Nelson, Richard R. & Winter, Sidney G., 1993. "In search of useful theory of innovation," Research Policy, Elsevier, vol. 22(2), pages 108-108, April.
    9. Langlois, Richard N. & Robertson, Paul L., 1989. "Explaining Vertical Integration: Lessons from the American Automobile Industry," The Journal of Economic History, Cambridge University Press, vol. 49(2), pages 361-375, June.
    10. Birchenhall, Chris, 1995. "Modular Technical Change and Genetic Algorithms," Computational Economics, Springer;Society for Computational Economics, vol. 8(3), pages 233-253, August.
    11. Pasinetti,Luigi, 1993. "Structural Economic Dynamics," Cambridge Books, Cambridge University Press, number 9780521432825.
    12. Pier P. Saviotti, 1996. "Technological Evolution, Variety and the Economy," Books, Edward Elgar Publishing, number 727.
    13. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    14. Daniel A. Levinthal, 1997. "Adaptation on Rugged Landscapes," Management Science, INFORMS, vol. 43(7), pages 934-950, July.
    15. Frenken, Koen, 2000. "A complexity approach to innovation networks. The case of the aircraft industry (1909-1997)," Research Policy, Elsevier, vol. 29(2), pages 257-272, February.
    16. Andreas Pyka & Günter Küppers (ed.), 2002. "Innovation Networks," Books, Edward Elgar Publishing, number 2769.
    17. Metcalfe, J S, 1995. "Technology Systems and Technology Policy in an Evolutionary Framework," Cambridge Journal of Economics, Oxford University Press, vol. 19(1), pages 25-46, February.
    18. Stuart Kauffman & Jose Lobo & William G. Macready, 1998. "Optimal Search on a Technology Landscape," Research in Economics 98-10-091e, Santa Fe Institute.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Koen Frenken & Alessandro Nuvolari, 2004. "Entropy statistics as a framework to analyse technological evolution," Chapters, in: John Foster & Werner Hölzl (ed.), Applied Evolutionary Economics and Complex Systems, chapter 5, Edward Elgar Publishing.
    2. Murmann, Johann Peter & Frenken, Koen, 2006. "Toward a systematic framework for research on dominant designs, technological innovations, and industrial change," Research Policy, Elsevier, vol. 35(7), pages 925-952, September.
    3. Dosi, Giovanni & Nelson, Richard R., 2010. "Technical Change and Industrial Dynamics as Evolutionary Processes," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 51-127, Elsevier.
    4. Nicoletta Corrocher & Marco Guerzoni, 2015. "Post-Entry Product Introduction: Who Explores New Niches?," Industry and Innovation, Taylor & Francis Journals, vol. 22(1), pages 18-36, January.
    5. Giovanni Dosi & Richard Nelson, 2013. "The Evolution of Technologies: An Assessment of the State-of-the-Art," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 3-46, June.
    6. Frenken, Koen & Leydesdorff, Loet, 2000. "Scaling trajectories in civil aircraft (1913-1997)," Research Policy, Elsevier, vol. 29(3), pages 331-348, March.
    7. Saviotti, Pier Paolo & Pyka, Andreas, 2004. "Economic development, qualitative change and employment creation," Structural Change and Economic Dynamics, Elsevier, vol. 15(3), pages 265-287, September.
    8. Leonardo Bargigli, 2005. "The limits of modularity in innovation and production," KITeS Working Papers 176, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Sep 2005.
    9. Andrea Bonaccorsi, 2011. "A Functional Theory of Technology and Technological Change," Chapters, in: Cristiano Antonelli (ed.), Handbook on the Economic Complexity of Technological Change, chapter 12, Edward Elgar Publishing.
    10. Paul Windrum & Cecilia Diaz & Despoina Filiou, 2009. "Exploring the relationship between technical and service characteristics," Journal of Evolutionary Economics, Springer, vol. 19(4), pages 567-588, August.
    11. Tommaso Ciarli & Karolina Safarzynska, 2020. "Sustainability and Industrial Challenge: The Hindering Role of Complexity," SPRU Working Paper Series 2020-18, SPRU - Science Policy Research Unit, University of Sussex Business School.
    12. D’Agata, Antonio & Mori, Kenji, 2012. "A dynamic linear economy with characteristic-based endogenous technical coefficients," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 195-204.
    13. Frenken, Koen, 2000. "A complexity approach to innovation networks. The case of the aircraft industry (1909-1997)," Research Policy, Elsevier, vol. 29(2), pages 257-272, February.
    14. Carolina Castaldi & Roberto Fontana & Alessandro Nuvolari, 2009. "‘Chariots of fire’: the evolution of tank technology, 1915–1945," Journal of Evolutionary Economics, Springer, vol. 19(4), pages 545-566, August.
    15. Karén Hovhannissian & Marco Valente, 2004. "Modeling Directed Local Search Strategies on Technology Landscapes: Depth and Breadth," ROCK Working Papers 028, Department of Computer and Management Sciences, University of Trento, Italy, revised 17 Jun 2008.
    16. Frenken, Koen, 2006. "A fitness landscape approach to technological complexity, modularity, and vertical disintegration," Structural Change and Economic Dynamics, Elsevier, vol. 17(3), pages 288-305, September.
    17. Frenken, Koen & Pyka, Andreas & Verspagen, Bart & Windrum, Paul, 2010. "Innovation, qualitative change and economic development--Special issue in honour of Pier-Paolo Saviotti," Structural Change and Economic Dynamics, Elsevier, vol. 21(1), pages 1-4, March.
    18. Phuong Nguyen & Pier-Paolo Saviotti & Michel Trommetter & Bernard Bourgeois, 2005. "Variety and the evolution of refinery processing," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 14(3), pages 469-500, June.
    19. Stanislao Gualdi & Antoine Mandel, 2019. "Endogenous growth in production networks," Journal of Evolutionary Economics, Springer, vol. 29(1), pages 91-117, March.
    20. Nicoletta Corrocher & Marco Guerzoni, 2009. "Product variety and price strategy in the ski manufacturing industry," Journal of Evolutionary Economics, Springer, vol. 19(4), pages 471-486, August.

    More about this item

    Keywords

    research and development ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unm:umamer:2000019. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Leonne Portz (email available below). General contact details of provider: https://edirc.repec.org/data/meritnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.