Technology Licensing and Technology Alliances
Frequently, new technologies arise under two or more alternative designs. Moreover, the state of each design evolves over time as a result of various cumulative improvements. In this paper, we study the strategic interaction between "incumbent" firms (those who already own a design) and "entrants" (those who do not but would like to adopt the new technology). We focus on two important decisions by an entrant: when to adopt the new technology and which design to choose. We show that if the entrant is primarily a production firm, then it should follow the leading technology, whereas a research-intensive entrant should follow the lagging technology. Regarding the time for technology adoption, we show that the entrant should make its decision as early as possible
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