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The Strategic Deployment of Quality-Improving Innovations

Author

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  • Luis Almeida Costa

    (Universidade Nova de Lisboa, Portugal)

  • Ingemar Dierickx

    (INSEAD, Fontainebleau, France)

Abstract

How can a firm deploy an innovation to fully realize its rent potential? We use a game-theoretic model to study the deployment of innovations that enhance the quality of an existing product. Three deployment strategies are compared: captive use, where the firm uses the innovation to enhance the competitive position of its own product; licensing, where the firm shares the innovation with competitors; and independent selling, where the firm incorporates the innovation in a complementary product or service that is sold separately to consumers. We study how the interplay of efficiency and competitive considerations favors certain deployment options over others.

Suggested Citation

  • Luis Almeida Costa & Ingemar Dierickx, 2005. "The Strategic Deployment of Quality-Improving Innovations," The Journal of Business, University of Chicago Press, vol. 78(3), pages 1049-1072, May.
    • Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:3:p:1049-1072
    DOI: 10.1086/429653
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    Cited by:

    1. Lim, Wei Shi & Tan, Soo Jiuan, 2010. "Outsourcing suppliers as downstream competitors: Biting the hand that feeds," European Journal of Operational Research, Elsevier, vol. 203(2), pages 360-369, June.

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