IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article

Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation

  • Ron Adner

    ()

    (INSEAD, Boulevard de Constance, 77305 Fontainebleau Cedex, France)

  • Daniel Levinthal

    ()

    (Wharton Business School, 2000 Steinberg-Dietrich Hall, Philadelphia, Pennsylvania 19104)

Registered author(s):

    The evolution of technology has been a central issue in the strategy and organizations literature. However, the focus of much of this work has been on what is essentially the "supply side" of technical change---the evolution of firm capabilities. We present a demand-based view of technology evolution that is focused on the interaction between technology development and the demand environment in which the technology is ultimately evaluated. We develop a formal computer simulation model that explicitly considers the influence of heterogeneity in market demand---the presence of consumers with different needs and requirements---on firms' innovation choices. The model is used to examine the dynamics of product and process innovation (Utterback and Abernathy 1975). The analysis reveals that demand heterogeneity offers an alternative to supply-side explanations of the technology life cycle. Further, by considering the implications of decreasing marginal utility from performance improvements, the model highlights the role of "technologically satisfied" consumers in shaping innovation incentives, and suggests a rationale for a new stage in the technology life cycle characterized by increasing performance at a stable price. The stage has not yet been treated formally in the literature, but is widely observed, most prominently in digital and information-based technologies.

    If 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.

    File URL: http://dx.doi.org/10.1287/mnsc.47.5.611.10482
    Download Restriction: no

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 47 (2001)
    Issue (Month): 5 (May)
    Pages: 611-628

    as
    in new window

    Handle: RePEc:inm:ormnsc:v:47:y:2001:i:5:p:611-628
    Contact details of provider: Postal:
    7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA

    Phone: +1-443-757-3500
    Fax: 443-757-3515
    Web page: http://www.informs.org/
    Email:


    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. 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.
    2. Mowery, David & Rosenberg, Nathan, 1993. "The influence of market demand upon innovation: A critical review of some recent empirical studies," Research Policy, Elsevier, vol. 22(2), pages 107-108, April.
    3. Wesley M. Cohen & Daniel A. Levinthal, 1994. "Fortune Favors the Prepared Firm," Management Science, INFORMS, vol. 40(2), pages 227-251, February.
    4. Jensen, Richard, 1982. "Adoption and diffusion of an innovation of uncertain profitability," Journal of Economic Theory, Elsevier, vol. 27(1), pages 182-193, June.
    5. Malerba, Franco, et al, 1999. "'History-Friendly' Models of Industry Evolution: The Computer Industry," Industrial and Corporate Change, Oxford University Press, vol. 8(1), pages 3-40, March.
    6. Clark, Kim B., 1985. "The interaction of design hierarchies and market concepts in technological evolution," Research Policy, Elsevier, vol. 14(5), pages 235-251, October.
    7. Sahal, Devendra, 1985. "Technological guideposts and innovation avenues," Research Policy, Elsevier, vol. 14(2), pages 61-82, April.
    8. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
    9. Daniel McFadden, 1986. "The Choice Theory Approach to Market Research," Marketing Science, INFORMS, vol. 5(4), pages 275-297.
    10. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
    11. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March.
    12. Robert Meyer & Eric J. Johnson, 1995. "Empirical Generalizations in the Modeling of Consumer Choice," Marketing Science, INFORMS, vol. 14(3_supplem), pages G180-G189.
    13. Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
    14. 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.
    15. de Bresson, C & Townsend, J, 1981. "Multivariate models for innovation--Looking at the Abernathy-Utterback model with other data," Omega, Elsevier, vol. 9(4), pages 429-436.
    16. Klepper, Steven, 1997. "Industry Life Cycles," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 145-81.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:47:y:2001:i:5:p:611-628. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.