Demand, innovation and the dynamics of market structure: the role of experimental users and diverse preferences
The history of a number of industries is marked by a succession of eras, associated with different dominant technologies. Within any era, industry concentration tends to grow. Particular eras are broken by the introduction of a new technology which, while initially inferior to the established one in the prominent uses, has the potential to become competitive. In many cases new entrants survive and grow, and the large established firms do not make the transition. In other cases the established firms are able to switch over effectively, and compete in the new era. This paper explores a model which generates this pattern and has focussed on the characteristics of the demand. We argue that the ability of the new firms exploring the new technology to survive long enough to get that technology effectively launched depends on the existence of fringe markets which the old technology does not serve well, or experimental users, or both. Established firms initially have little incentive to adopt the new technology, which initially is inferior to the technology they have mastered. New firms generally cannot survive in head-to-head conflict with established firms on the market well served by the latter. The new firms need to find a market that keeps them alive long enough so that they can develop the new technology to a point where it is competitive on the main market. Niche markets, or experimental users, can provide that space.
|Date of creation:||Jan 2003|
|Date of revision:||Jan 2003|
|Contact details of provider:|| Postal: via Sarfatti, 25 - 20136 Milano - Italy|
Web page: http://www.kites.unibocconi.it/
|Order Information:|| Postal: E G E A - via R. Sarfatti, 25 - 20136 Milano -Italy|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
- Metcalfe, J.S. & James, Andrew & Mina, Andrea, 2005. "Emergent innovation systems and the delivery of clinical services: The case of intra-ocular lenses," Research Policy, Elsevier, vol. 34(9), pages 1283-1304, November.
- Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
- Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
- David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
- Malerba, Franco, et al, 1999. "'History-Friendly' Models of Industry Evolution: The Computer Industry," Industrial and Corporate Change, Oxford University Press, vol. 8(1), pages 3-40, March.
- Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, vol. 75(4), pages 708-720, September.
- Christensen, Clayton M. & Rosenbloom, Richard S., 1995. "Explaining the attacker's advantage: Technological paradigms, organizational dynamics, and the value network," Research Policy, Elsevier, vol. 24(2), pages 233-257, March.
When requesting a correction, please mention this item's handle: RePEc:cri:cespri:wp135. 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: (Valerio Sterzi)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.