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Strategic Innovation and Technology Adoption in an Evolving Industry

Author

Listed:
  • Darren Filson

    (Claremont Graduate University)

  • Richard T. Gretz

    (Claremont Graduate University)

Abstract

We introduce a racing model with multiple product generations, product innovation, spin-outs, and licensing. Industry conditions and innovation characteristics affect who wins the race and who markets the resulting product. Small firms market their innovations when they pioneer a new generation or improve quality in a young generation and license their innovations in mature generations. If old generation leaders ever market improvements in young generation goods, they do so early on. Leadership in mature generations persists. Tests on the rigid disk drive industry (1977-97) provide empirical support. The results have implications for antitrust policies and policies governing employee non-compete agreements.

Suggested Citation

  • Darren Filson & Richard T. Gretz, 2003. "Strategic Innovation and Technology Adoption in an Evolving Industry," Claremont Colleges Working Papers 2003-08, Claremont Colleges.
  • Handle: RePEc:clm:clmeco:2003-08
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    File URL: http://www.claremontmckenna.edu/rdschool/papers/2003-08.pdf
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    References listed on IDEAS

    as
    1. Gilbert, Richard & Tom, Willard K, 2001. "Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later," Department of Economics, Working Paper Series qt4mf5t2bm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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    4. Richard R. Nelson, 1988. "Modelling the Connections in the Cross Section between Technical Progress and R&D Intensity," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 478-485, Autumn.
    5. Darren Filson, 2001. "The Nature and Effects of Technological Change over the Industry Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 460-494, July.
    6. April Mitchell Franco & Darren Filson, 2000. "Knowledge Diffusion through Employee Mobility," Claremont Colleges Working Papers 2000-61, Claremont Colleges.
    7. Salant, Stephen W, 1984. "Preemptive Patenting and the Persistence of Monopoly: Comment," American Economic Review, American Economic Association, vol. 74(1), pages 247-250, March.
    8. Cockburn, Iain & Henderson, Rebecca, 1994. "Racing to Invest? The Dynamics of Competition in Ethical Drug Discovery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(3), pages 481-519, Fall.
    9. Christensen, Clayton M., 1993. "The Rigid Disk Drive Industry: A History of Commercial and Technological Turbulence," Business History Review, Cambridge University Press, vol. 67(04), pages 531-588, December.
    10. Cooper, David P., 2001. "Innovation and reciprocal externalities: information transmission via job mobility," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 403-425, August.
    11. Josh Lerner, 1997. "An Empirical Exploration of a Technology Race," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 228-247, Summer.
    12. 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.
    13. Joshua S. Cans & Scott Stern, 2000. "Incumbency and R&D Incentives: Licensing the Gale of Creative Destruction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 485-511, December.
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    Cited by:

    1. Fumiko Hayashi & Bin Grace Li & Zhu Wang, 2017. "Innovation, Deregulation, and the Life Cycle of a Financial Service Industry," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 180-203, October.
    2. Darren Filson & Neal Masia, 2007. "Effects of profit-reducing policies on firm survival, financial performance, and new drug introductions in the research-based pharmaceutical industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 329-351.
    3. Natália Barbosa & Ana Paula Faria & Vasco Eiriz, 2014. "Industry- and firm-specific factors of innovation novelty," Industrial and Corporate Change, Oxford University Press, vol. 23(3), pages 865-902.
    4. Roberto Fontana & Lionel Nesta, 2009. "Product Innovation and Survival in a High-Tech Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(4), pages 287-306, June.
    5. Kim, YoungJun & Vonortas, Nicholas S., 2006. "Technology licensing partners," Journal of Economics and Business, Elsevier, vol. 58(4), pages 273-289.
    6. Yim, Hyung Rok, 2008. "Quality shock vs. market shock: Lessons from recently established rapidly growing U.S. startups," Journal of Business Venturing, Elsevier, vol. 23(2), pages 141-164, March.
    7. Richard Gretz, 2010. "Console Price and Software Availability in the Home Video Game Industry," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(1), pages 81-94, March.
    8. Boyan Jovanovic & Chung-Yi Tse, 2010. "Entry and Exit Echoes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 514-536, July.
    9. repec:eee:irlaec:v:54:y:2018:i:c:p:49-57 is not listed on IDEAS

    More about this item

    Keywords

    industry dynamics; employee mobility; innovation market; convenant not to compete; spin-offs;

    JEL classification:

    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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