IDEAS home Printed from
   My bibliography  Save this article

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)


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.

Suggested Citation

  • Melissa M. Appleyard & Clara Y. Wang & J. Alexander Liddle & John Carruthers, 2008. "The innovator's non-dilemma: the case of next-generation lithography," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(5), pages 407-423.
  • Handle: RePEc:wly:mgtdec:v:29:y:2008:i:5:p:407-423 DOI: 10.1002/mde.1404

    Download full text from publisher

    File URL:
    File Function: Link to full text; subscription required
    Download Restriction: no

    References listed on IDEAS

    1. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-1320, December.
    2. 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.
    3. 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, Cambridge University Press, vol. 2(02), pages 93-113, August.
    4. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-748, September.
    5. 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 1293-1306, December.
    6. Amir, Rabah, 2000. "Modelling imperfectly appropriable R&D via spillovers," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1013-1032, October.
    7. 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.
    8. 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 514-526, June.
    9. 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.
    10. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-121, January.
    11. 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.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Ron Sanchez & Joseph T. Mahoney, 2013. "Modularity and economic organization: concepts, theory, observations, and predictions," Chapters,in: Handbook of Economic Organization, chapter 20 Edward Elgar Publishing.
    2. Lange, Knut & Müller-Seitz, Gordon & Sydow, Jörg & Windeler, Arnold, 2013. "Financing innovations in uncertain networks—Filling in roadmap gaps in the semiconductor industry," Research Policy, Elsevier, vol. 42(3), pages 647-661.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:29:y:2008:i:5:p:407-423. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.