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Author: | Stein, J. C. |
Title: | Waves of creative destruction: Firm-specific lerning-by-doing and the dynamics of innovation |
Journal: | Review of Economic Studies
1997 : APR, VOL. 64(2):219, p. 265-288 |
Index terms: | INNOVATION COMPANIES COMPETITION PRODUCTS QUALITY DISTRIBUTION COSTS |
Language: | eng |
Abstract: | Even in industries in which innovation and knowledge spillovers are critically important, firms are unlikely to compete solely on the basis of such innovation-driven variables as product quality. They will compete in part of the basis of variables such as strength of their respective customer bases. With customer bases there is learning-by-doing at the product level, but there are no spillovers across firms. Introducing customer bases into a dynamic model of repeated innovation alters the model's predictions. The potential for firm- and product-specific learning-by-doing can be quite harmful to long-run growth. Customer bases tend to generate endogenous waves in innovative activity. When a new firm enters the market, it breaks the incumbent's stranglehold on the customer base. |
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