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Demand and Innovation in Services: the Case of Mobile Communications

Author

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  • Nicoletta Corrocher

    (CESPRI - Bocconi University, Milan, Italy and NFH - University of Tromso, Tromso, Norway.)

  • Lorenzo Zirulia

    (CESPRI - Bocconi University, Milan and University of Bologna, Bologna, Italy.)

Abstract

This paper aims at analyzing the characteristics and the determinants of innovation in the mobile communication service industry, by emphasising in particular the role of demand. In a Shumpeterian spirit, we argue that competition in this sector crucially depends upon innovation, and that, given the specific characteristics of the industry, firms' innovative strategies are strongly affected by demand. Our main point is that in a context of uncertainty, demand affects firms' innovative strategies in two ways: first, by providing information on users' behaviour and by increasing the capability of market segmentation; second, by providing invcentives to innovate. This argument is supported by an empirical analysis carried out on the basis of an original dataset including all the tariff plans offered in the history of the Italian market up to 2005. We find that both firms' installed base of customers and market saturation play a role in shaping firms' innovative activities, in terms of number and type of innovations.

Suggested Citation

  • Nicoletta Corrocher & Lorenzo Zirulia, 2007. "Demand and Innovation in Services: the Case of Mobile Communications," KITeS Working Papers 199, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Mar 2007.
    • Handle: RePEc:cri:cespri:wp199
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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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