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The innovator's non-dilemma: the case of next-generation lithography

  • Melissa M. Appleyard

    (School of Business Administration, Portland State University, Portland, OR, USA)

  • Clara Y. Wang

    (Ithaca, NY, USA)

  • J. Alexander Liddle

    (Molecular Foundry, Lawrence Berkeley National Laboratory, Berkeley, CA, USA)

  • John Carruthers

    (Portland State University, Portland, OR, USA)

Registered author(s):

    Previous studies have analyzed how incumbents may falter when they focus too narrowly on satisfying the needs of current customers at the expense of pursuing innovations that will ensure future market leadership. This paper examines this 'dilemma' faced by incumbents and considers cases where incumbents do spearhead innovation on the technology frontier thus enabling future product generations. In particular, we examine the case of the semiconductor industry confronting a technological discontinuity in the production of chips. In anticipation of a discontinuity in the lithography production module, leading firms in the semiconductor industry have initiated next-generation lithography (NGL) projects. These projects have exhibited an unprecedented level of horizontal and vertical cooperation. Our research analyzes how such cooperative research and development (R&D) programs allow incumbent innovators to mitigate four areas of uncertainty-leadership, preemption, performance, and industry adoption. We adapt a Hotelling location model to demonstrate the tension between mitigating these uncertainties through interfirm cooperation and the possibility of increased downstream competition. Such tensions have influenced cooperation within and across the R&D consortia pursuing NGL led by IBM, Intel, and Bell Labs. Copyright © 2008 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.1404
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    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 29 (2008)
    Issue (Month): 5 ()
    Pages: 407-423

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    Handle: RePEc:wly:mgtdec:v:29:y:2008:i:5:p:407-423
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Rabah Amir, 1998. "Modelling Imperfectly Appropriable R&D via Spillovers," CIE Discussion Papers 1998-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    2. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
    3. Henderson, Rebecca, 1995. "Of life cycles real and imaginary: The unexpectedly long old age of optical lithography," Research Policy, Elsevier, vol. 24(4), pages 631-643, July.
    4. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December.
    5. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-48, September.
    6. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
    7. Linden Greg & Mowery David C. & Ham Ziedonis Rosemarie, 2000. "National Technology Policy in Global Markets: Developing Next-Generation Lithography in the Semiconductor Industry," Business and Politics, De Gruyter, vol. 2(2), pages 1-22, August.
    8. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
    9. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
    10. Marco Iansiti, 2000. "How the Incumbent Can Win: Managing Technological Transitions in the Semiconductor Industry," Management Science, INFORMS, vol. 46(2), pages 169-185, February.
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