Strategic Experimentation and Disruptive Technological Change

Fabiano Schivardi and Martin Schneider

Review of Economic Dynamics, 2008, vol. 11, issue 2, 386-412

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)

Keywords: Oligopoly; Innovation; Learning; Dynamic games (search for similar items in EconPapers)
JEL-codes: C63 C73 D83 L13 O31 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (7)

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Working Paper: Strategic Experimentation and Disruptive Technological Change (2005)
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DOI: 10.1016/j.red.2007.09.002

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