Firm Asymmetries and Sequential R&D: Theory and Evidence from the Mainframe Computer Industry

Tarun Khanna and Marco Iansiti
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Tarun Khanna: Graduate School of Business Administration, Harvard University, Boston, Massachusetts 02163
Marco Iansiti: Graduate School of Business Administration, Harvard University, Boston, Massachusetts 02163

Management Science, 1997, vol. 43, issue 4, 405-421

Abstract: We incorporate strategic considerations into the analysis of a problem that has hitherto been treated in a decision theoretic fashion: the allocation of scarce R&D resources when R&D proceeds in stages. In doing so, we formalize a notion of "system complexity" and investigate its implications for the allocation of these scarce resources. Using detailed data from fieldwork at all mainframe manufacturers in the world to investigate our theoretical predictions, we provide evidence that larger market share firms set more aggressive stage targets, as do more resource-rich firms. Our results can be seen as a verification of the mechanism underlying Arrow's "replacement" effect.

Keywords: R&D strategy; product development and market structure; computer industry (search for similar items in EconPapers)
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:43:y:1997:i:4:p:405-421

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