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Strategic Experimentation and Disruptive Technological Change

Author

Listed:
  • Fabiano Schivardi

    (University of Cagliari)

  • Martin Schneider

    (New York University)

Abstract

This paper studies the diffusion of a new technology that is brought to market while its potential is still uncertain. We consider a dynamic game in which an incumbent and a startup firm improve both a new and a rival old technology while learning about the relative potential of both technologies. The main findings are that (i) risk considerations make incumbents with higher market shares more likely to adopt the new technology and (ii) changes in market power are often preceded by a subpar performance of the new technology. We also show that introducing a better new technology or confronting a worse old technology may hurt the startup firm as its new technology is then adopted earlier by incumbents. (Copyright: Elsevier)

Suggested Citation

  • Fabiano Schivardi & Martin Schneider, 2008. "Strategic Experimentation and Disruptive Technological Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 386-412, April.
    • Handle: RePEc:red:issued:06-110
    DOI: 10.1016/j.red.2007.09.002
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    Cited by:

    1. Malerba, Franco, 2007. "Innovation and the dynamics and evolution of industries: Progress and challenges," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 675-699, August.
    2. Weintraub, Gabriel Y. & Benkard, C. Lanier & Van Roy, Benjamin, 2007. "Computational Methods for Oblivious Equilibrium," Research Papers 1969, Stanford University, Graduate School of Business.
    3. Schivardi, Fabiano, 2003. "Reallocation and learning over the business cycle," European Economic Review, Elsevier, vol. 47(1), pages 95-111, February.
    4. Minetti, Raoul & Murro, Pierluigi & Paiella, Monica, 2015. "Ownership structure, governance, and innovation," European Economic Review, Elsevier, vol. 80(C), pages 165-193.
    5. Mariagiovanna Baccara & Ronny Razin, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," Levine's Working Paper Archive 122247000000000194, David K. Levine.
    6. Weintraub, Gabriel Y. & Benkard, C. Lanier & Van Roy, Benjamin, 2007. "Markov Perfect Industry Dynamics with Many Firms," Research Papers 1919r, Stanford University, Graduate School of Business.
    7. Horvath, Michael & Schivardi, Fabiano & Woywode, Michael, 2001. "On industry life-cycles: delay, entry, and shakeout in beer brewing," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1023-1052, July.
    8. Valentina Peruzzi, 2024. "Open innovation in family-owned firms," Working Papers CASMEF 2401, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    9. Pérez, Carlos J. & Ponce, Carlos J., 2015. "Disruption costs, learning by doing, and technology adoption," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 64-75.
    10. Carlos J.Pérez & Carlos J.Ponce, 2013. "Disruption costs and the choice of technology," ILADES-UAH Working Papers inv292, Universidad Alberto Hurtado/School of Economics and Business.
    11. Gabriel Y. Weintraub & C. Lanier Benkard & Benjamin Van Roy, 2010. "Computational Methods for Oblivious Equilibrium," Operations Research, INFORMS, vol. 58(4-part-2), pages 1247-1265, August.

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    More about this item

    Keywords

    Oligopoly; Innovation; Learning; Dynamic games;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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