Technological competition, strategies of the firms and the choice of the first users: the case of road guidance technologies

Based on an in-depth study of two different road guidance technologies, both under increasing returns to adoption, this paper is an attempt to elucidate the strategic game played by the producers and the first users before the introduction of the technologies onto the market. It shows that it is possible to endogenize the decisions made by the first users (who are chosen by the supplier) as much as those of the suppliers when they choose the first users. When identifying first users, firms evaluate their capacity to influence other potential adopters, a capacity which depends on their position in the social networks to which they belong. In order to enrol the first users, the producers of a technology develop various strategies, including standardization in voluntary standardization committees, pre-announcement, scientific legitimizing and even technological transformation of the product itself. Indeed, the first users who seem strategically vital by the sponsor of the first system are not necessarily the same as those targeted by the sponsors of the second technology. Thus, the degree of substitutability itself appears as an endogenous variable. This analysis provides a new basis for understanding technological competition and completes economic modelling of the competition.