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Firms and the Creation of New Markets

In: Handbook of New Institutional Economics

Author

Listed:
  • Erin Anderson

    (INSEAD)

  • Hubert Gatignon

    (INSEAD)

Abstract

Markets are created by firms, who make decisions about the innovation process and the marketing of innovations. New Institutional Economics, particularly Transaction Cost Economics, is well placed to explain the decisions firms make in highly uncertain and risky businesses, where most innovations fail. Decision-makers’ capacity to follow a conscious economic logic to the fullest is considerably strained by factors such as bounded rationality, information impactedness, and the tacit nature of knowledge. Therefore, opportunities for self-interest seeking with guile abound (e.g., by suppliers or business partners), and contracts are insufficient to protect firm-specific assets. We present the issues arising in the process of generating innovations and then adopt the demand perspective to introduce the problems managers face in creating new markets. We show that the creation of new markets by firms, both when developing and commercializing innovation, is best understood through the lens of New Institutional Economics.

Suggested Citation

  • Erin Anderson & Hubert Gatignon, 2025. "Firms and the Creation of New Markets," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, edition 0, chapter 22, pages 535-564, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-50810-3_22
    DOI: 10.1007/978-3-031-50810-3_22
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