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Optimal response to a next generation new product introduction: to imitate or to leapfrog?

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  • D. Sudharshan

    (Gatton College of Business and Economics, University of Kentucky, 255F Business and Economics Bldg., Lexington, KY 40506-0034, USA)

  • Ben Shaw-Ching Liu

    (College of Business Administration, Butler University, 4600 Sunset Ave. Indianapolis, IN 46208, USA)

  • Brian T. Ratchford

    (Robert H. Smith School of Business, University of Maryland, 3467 Van Mulching Hall, College Park, MD 20742, USA)

Abstract

In this paper, we study the choice of technology levels and timing of the introduction of new technologies in a market in which customer sophistication increases over time. Faced with the introduction of a new generation product, a firm can either imitate or leapfrog it. If the new product is introduced optimally, we show that the optimal response is to imitate it. This is because the technology leader's best strategy is to set a technology level that makes imitation the best response. We also derive decision rules for the timing of introduction of new technologies. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • D. Sudharshan & Ben Shaw-Ching Liu & Brian T. Ratchford, 2006. "Optimal response to a next generation new product introduction: to imitate or to leapfrog?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 41-62.
  • Handle: RePEc:wly:mgtdec:v:27:y:2006:i:1:p:41-62 DOI: 10.1002/mde.1247
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    References listed on IDEAS

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    1. John A. Norton & Frank M. Bass, 1987. "A Diffusion Theory Model of Adoption and Substitution for Successive Generations of High-Technology Products," Management Science, INFORMS, vol. 33(9), pages 1069-1086, September.
    2. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-748, September.
    3. Ron Adner & Daniel Levinthal, 2001. "Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation," Management Science, INFORMS, vol. 47(5), pages 611-628, May.
    4. Pankaj Ghemawat, 1991. "Market Incumbency and Technological Inertia," Marketing Science, INFORMS, vol. 10(2), pages 161-171.
    5. Leslie Olin Morgan & Ruskin M. Morgan & William L. Moore, 2001. "Quality and Time-to-Market Trade-offs when There Are Multiple Product Generations," Manufacturing & Service Operations Management, INFORMS, vol. 3(2), pages 89-104, June.
    6. Kamien,Morton I. & Schwartz,Nancy L., 1982. "Market Structure and Innovation," Cambridge Books, Cambridge University Press, number 9780521293853, March.
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