Dominant Designs, Innovation Shocks and the Follower's Dilemma
Strategic Management Journal, Forthcoming
46 Pages Posted: 25 Oct 2013
Date Written: October 22, 2013
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: Suggested Citation