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Innovation and Dominant Design in Mobile Telephony

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  • 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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  • Heli Koski & Tobias Kretschmer, 2007. "Innovation and Dominant Design in Mobile Telephony," Industry and Innovation, Taylor & Francis Journals, vol. 14(3), pages 305-324.
    • Handle: RePEc:taf:indinn:v:14:y:2007:i:3:p:305-324
    DOI: 10.1080/13662710701369262
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    Cited by:

    1. 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.
    2. 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.
    3. Cecere, Grazia & Corrocher, Nicoletta & Battaglia, Riccardo David, 2015. "Innovation and competition in the smartphone industry: Is there a dominant design?," Telecommunications Policy, Elsevier, vol. 39(3), pages 162-175.
    4. Buss, Philipp & Peukert, Christian, 2015. "R&D outsourcing and intellectual property infringement," Research Policy, Elsevier, vol. 44(4), pages 977-989.
    5. Genakos, Christos & Kretschmer, Tobias & Nicolle, Ambre, 2021. "Strategic confusopoly: evidence from the UK mobile market," LSE Research Online Documents on Economics 113835, London School of Economics and Political Science, LSE Library.
    6. 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.
    7. Kivi, Antero & Smura, Timo & Töyli, Juuso, 2012. "Technology product evolution and the diffusion of new product features," Technological Forecasting and Social Change, Elsevier, vol. 79(1), pages 107-126.
    8. 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).
    9. 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.
    10. Ram Mudambi, 2013. "Location, control and firm innovation: the case of the mobile handset industry," Chapters, in: Frank Giarratani & Geoffrey J.D. Hewings & Philip McCann (ed.), Handbook of Industry Studies and Economic Geography, chapter 9, pages 230-252, Edward Elgar Publishing.
    11. Swapnendu Banerjee & Arijit Mukherjee & Sougata Poddar, 2025. "Product differentiation, demand expansion and the welfare effects of cross‐ownership," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(1), pages 193-226, February.
    12. Paolo Calvosa, 2021. "Entry, Exit and Innovation over the Industry Life Cycle in Converging Sectors: An Analysis of the Smartphone Industry," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(12), pages 151-151, July.
    13. Ronald Klingebiel & John Joseph, 2016. "Entry timing and innovation strategy in feature phones," Strategic Management Journal, Wiley Blackwell, vol. 37(6), pages 1002-1020, June.
    14. Wipo, 2017. "World Intellectual Property Report 2017 - Intangible Capital in Global Value Chains," WIPO Economics & Statistics Series, World Intellectual Property Organization - Economics and Statistics Division, number 2017:944, January.
    15. 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.

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    Keywords

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    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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