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Author:Metcalf, C.J.
Title:Persistence of technological leadership: emerging technologies and incremental innovation
Journal:Journal of Industrial Economics
2011 : JUN, VOL. 59:2, p. 199-224
Index terms:technological innovation
innovation
competition
profit
new enterprise
Language:eng
Abstract:In a competitive innovation model, theoretical conditions are derived for an entrant to displace the incumbent firm through innovating in an undeveloped, substitute (emerging) technology. The main conclusion presents conditions on profitability and speed of innovation that yield a Markov Perfect Equilibrium where the entrant pursues the emerging technology, while the incumbent chooses to persist with the established technology, collecting short-term profits. Notably, this result does not require that the entrant is superior to the incumbent for innovation. Finally, when the model is calibrated to hard drive industry data, its implications are consistent with the empirically observed outcomes.
SCIMA record nr: 275598
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