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Experimental Choice and Disruptive Technologies

Author

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  • Joshua S. Gans

    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

This paper examines how a firm’s choice of the type of experiment impacts on its potential exploitation of new technological opportunities. It does so in the context of the failure of successful firms (or disruption) where the literature has informally suggested that firms undertake errors in experimental choice. It is shown that firms will generically choose experiments that minimize false positives (a high-bar) or minimize false negatives (a low-bar) rather than strike a balance between the two. This is done to better inform decisions regarding the exploitation of technological opportunities. It is shown that these choices can differ between incumbents and entrants based on their fundamentals and because of the anticipation of competition between them.

Suggested Citation

  • Joshua S. Gans, 2023. "Experimental Choice and Disruptive Technologies," Management Science, INFORMS, vol. 69(11), pages 7044-7058, November.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:11:p:7044-7058
    DOI: 10.1287/mnsc.2022.4496
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