Competitive Product Introductions in Technologically Dynamic Environments

Abstract:     
New product development in several industries is driven by innovations in underlying technologies. Firms developing new generation products often face the following choice: they can either introduce a product based on a proven and immediately available technology, or delay product introduction to incorporate a superior, yet unproven, technology. In this paper, we study how competing firms introduce new products in such technologically fluid environments. We show that this technology selection decision for new-generation products depends on the evolution of technology trajectories, the additional risk involved in developing advanced versions and the competitive intensity in the end-product market. By staggering their new product introductions over time, firms are able to utilize introduction timing as an additional dimension to distance themselves from their rival. The optimal investment by a firm in product development, and its sensitivity with respect to competition, are also characterized. We also extend our analysis to consider the impact of market factors such as network effects and growth potential on the profitability of different introduction strategies.

Keywords: Introduction Timing, Technology Trajectories, Competition, Network Effects, Product Innovation, Operations Strategy

Working Paper Series