Dominant Designs, Innovation Shocks and the Follower's Dilemma

Strategic Management Journal, Forthcoming

46 Pages Posted: 25 Oct 2013

See all articles by Nicholas Argyres

Nicholas Argyres

Washington University in St. Louis

Lyda S. Bigelow

University of Utah - David Eccles School of Business

Jackson A. Nickerson

Washington University in St. Louis - John M. Olin Business School

Date Written: October 22, 2013

Abstract

A dominant design is thought to usher in a period of intense competition based on cost, causing an often-fierce industry shakeout. We aim to challenge the foundations of the dominant design literature, and develop new insights about the evolution of competition. We argue that strategic repositioning and elevated exit rates are often observed long before the emergence of a dominant design, and that a key cause is the introduction of a particular product for which demand is unexpectedly high (an ‘innovation shock.’) This introduction creates a dilemma for followers, which we suggest is resolved based on followers’ comparative adjustment costs. We test implications of these ideas on data from the early U.S. auto industry, treating Ford’s Model T as the innovation shock.

Keywords: dominant design, industry evolution, innovation, strategic positioning, industry shakeout

JEL Classification: D21

Suggested Citation

Argyres, Nicholas and Bigelow, Lyda S. and Nickerson, Jackson A., Dominant Designs, Innovation Shocks and the Follower's Dilemma (October 22, 2013). Strategic Management Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2343740

Nicholas Argyres (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Lyda S. Bigelow

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
801-585-3471 (Phone)

Jackson A. Nickerson

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6366 (Phone)
314-935-6359 (Fax)

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