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Innovation and Dominant Design in Mobile Telephony

Author Info

Listed author(s):
  • Heli Koski
  • Tobias Kretschmer

Abstract

We document the evolution of product innovation and features in the mobile telephone handset market. We distinguish between two types of product innovation: vertical and horizontal innovation. Using data on mobile telephone handsets from 1990 to 2003, we study the emergence of a dominant design in vertical and horizontal innovations and find that, while vertical product characteristics converged to some extent, no dominant design emerged. For horizontal product characteristics, some horizontal innovations remained differentiated, whereas others were adopted in all new handset models, thus forming a dominant design in horizontal product features. We explain this pattern using the concept of dominant design and results from the theoretical literature on the incentives for horizontal and vertical differentiation.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/13662710701369262
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Article provided by Taylor & Francis Journals in its journal Industry and Innovation.

Volume (Year): 14 (2007)
Issue (Month): 3 ()
Pages: 305-324

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Handle: RePEc:taf:indinn:v:14:y:2007:i:3:p:305-324
DOI: 10.1080/13662710701369262
Contact details of provider: Web page: http://www.tandfonline.com/CIAI20

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Keywords: Product innovation; mobile phone handsets; dominant design; min-max principle;

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Find related papers by JEL classification:
  • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
  • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
  • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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  1. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-748, September.
  2. Lehrer, Mark, 2004. "National lead markets and the design competition for 3G network applications," Journal of Business Research, Elsevier, vol. 57(12), pages 1397-1401, December.
  3. Heli Koski & Tobias Kretschmer, 2004. "Entry, Standards and Competition: Firm Strategies and the Diffusion of Mobile Telephony," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 26(1), pages 89-113, November.
  4. Tobias Kretschmer & Katrin Muehlfeld, 2004. "Co-opetition in Standard-Setting: The Case of the Compact Disc," Working Papers 04-14, NET Institute, revised Oct 2004.
  5. Liikanen, Jukka & Stoneman, Paul & Toivanen, Otto, 2004. "Intergenerational effects in the diffusion of new technology: the case of mobile phones," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1137-1154, November.
  6. Heli Koski & Tobias Kretschmer, 2004. "Survey on Competing in Network Industries: Firm Strategies, Market Outcomes, and Policy Implications," Journal of Industry, Competition and Trade, Springer, vol. 4(1), pages 5-31, 03.
  7. Rosenkranz, Stephanie, 2003. "Simultaneous choice of process and product innovation when consumers have a preference for product variety," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 183-201, February.
  8. Rebecca Henderson, 1993. "Underinvestment and Incompetence as Responses to Radical Innovation: Evidence from the Photolithographic Alignment Equipment Industry," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 248-270, Summer.
  9. Geroski, Paul, 2003. "The Evolution of New Markets," OUP Catalogue, Oxford University Press, number 9780199248896.
  10. Clayton M. Christensen & Fernando F. Suárez & James M. Utterback, 1998. "Strategies for Survival in Fast-Changing Industries," Management Science, INFORMS, vol. 44(12-Part-2), pages 207-220, December.
  11. 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.
  12. Robert Axelrod & Will Mitchell & Robert E. Thomas & D. Scott Bennett & Erhard Bruderer, 1995. "Coalition Formation in Standard-Setting Alliances," Management Science, INFORMS, vol. 41(9), pages 1493-1508, September.
  13. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
  14. Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," CORE Discussion Papers 1989020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Heli Koski & Tobias Kretschmer, 2004. "Competing in Network Industries--A Rejoinder," Journal of Industry, Competition and Trade, Springer, vol. 4(1), pages 67-69, 03.
  16. Czarnitzki, Dirk & Kraft, Kornelius, 2004. "An empirical test of the asymmetric models on innovative activity: who invests more into R&D, the incumbent or the challenger?," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 153-173, June.
  17. Gandal, Neil & Salant, David & Waverman, Leonard, 0. "Standards in wireless telephone networks," Telecommunications Policy, Elsevier, vol. 27(5-6), pages 325-332, June.
  18. Degryse, Hans, 1996. "On the Interaction between Vertical and Horizontal Product Differentiation: An Application to Banking," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 169-186, June.
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Cited by:

  1. Vesselkova, Alexandr & Riikonena, Antti & Hämmäinena & Heikki, 2015. "Evolution of mobile handset feature dependences," 26th European Regional ITS Conference, Madrid 2015 127192, International Telecommunications Society (ITS).
  2. Koski, Heli & Kretchmer, Tobias, 2009. "The Role of Product Innovation on the Diffusion of Mobile Telephone," Discussion Papers 1200, The Research Institute of the Finnish Economy.
  3. Koski, Heli & Kretschmer, Tobias, 2010. "New product development and firm value in mobile handset production," Information Economics and Policy, Elsevier, vol. 22(1), pages 42-50, March.
  4. Ram Mudambi, 2013. "Location, control and firm innovation: the case of the mobile handset industry," Chapters,in: Handbook of Industry Studies and Economic Geography, chapter 9, pages 230-252 Edward Elgar Publishing.
  5. Riikonen, Antti & Smura, Timo & Kivi, Antero & Töyli, Juuso, 2013. "Diffusion of mobile handset features: Analysis of turning points and stages," Telecommunications Policy, Elsevier, vol. 37(6), pages 563-572.
  6. Buss, Philipp & Peukert, Christian, 2015. "R&D outsourcing and intellectual property infringement," Research Policy, Elsevier, vol. 44(4), pages 977-989.
  7. Claussen, Jörg & Essling, Christian & Kretschmer, Tobias, 2015. "When less can be more – Setting technology levels in complementary goods markets," Research Policy, Elsevier, vol. 44(2), pages 328-339.
  8. Riikonen, Antti & Smura, Timo & Töyli, Juuso, 2016. "The effects of price, popularity, and technological sophistication on mobile handset replacement and unit lifetime," Technological Forecasting and Social Change, Elsevier, vol. 103(C), pages 313-323.

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