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Innovative leadership: First-mover advantages in new product adoption

  • Richard Jensen

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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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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