The Strategic Deployment of Quality-Improving Innovations

Luis Almeida Costa and Ingemar Dierickx
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Luis Almeida Costa: Universidade Nova de Lisboa, Portugal
Ingemar Dierickx: INSEAD, Fontainebleau, France

The Journal of Business, 2005, vol. 78, issue 3, 1049-1072

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.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:78:y:2005:i:3:p:1049-1072

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