Do First Mover Advantages for Producers of Energy Efficient Appliances Exist? The Case of Refrigerators

20 Pages Posted: 23 Aug 2013

See all articles by Thomas Cleff

Thomas Cleff

Pforzheim University of Applied Sciences; ZEW – Leibniz Centre for European Economic Research

Klaus Rennings

Center for European Economic Research (ZEW)

Date Written: August 15, 2013

Abstract

Energy efficiency regulation is an important driver for innovations in environmental technologies. Improvements of energy efficiency do not only contribute to reach environmental policy targets, they can be furthermore economically profitable. E.g. private households can reduce their costs in the long term by using efficient household appliances. But how can the specific competitive position on this market be assessed for German producers, and how strong is the competitiveness from firms coming from emerging economies? We analyse - as an example - the global refrigerator market, using the lead market approach for environmental innovations.

As our results show, Germany has the most lead market potentials for energy-efficient refrigerators, followed by Korea und Italy. First mover advantages for high-tech energy efficient appliances can be realised on the German market. This is backed by high energy efficiency standards in Europe which diffuse after some years to other countries.

Since the pay-off time for energy efficient household appliances is with 7 to 10 years quite long, also a cost strategy with low prices can be successful. Especially in the case when the price of electricity and the national income are low. Markets for such products are for example in Asia and Russia.

Producers use the existence of both strategy options to operate with different brands and product lines in different market niches at the same time. For firms in countries that do not have sufficient lead market potentials, innovations in energy efficiency must be targeted to fit the preferences of users in the lead market. The screening of the lead market can take on varying degrees of intensity. A good way for a company to establish ties with a lead market is via producers with long experience on the Lead Market. It can be realised through a simple sales cooperation with local producers or a merger with a local producer of the lead market.

Keywords: household appliances, energy efficiency, refrigerators, lead market, first mover

JEL Classification: Q55, O33, Q01, Q58

Suggested Citation

Cleff, Thomas and Rennings, Klaus, Do First Mover Advantages for Producers of Energy Efficient Appliances Exist? The Case of Refrigerators (August 15, 2013). ZEW - Centre for European Economic Research Discussion Paper No. 13-054. Available at SSRN: https://ssrn.com/abstract=2314353 or http://dx.doi.org/10.2139/ssrn.2314353

Thomas Cleff (Contact Author)

Pforzheim University of Applied Sciences ( email )

Tiefenbronner Str. 65
Pforzheim, 75175
Germany

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Klaus Rennings

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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