Competing in Design: Differentiation, Imitation, and Value Capture

40 Pages Posted: 20 Aug 2016

See all articles by Rainer Filitz

Rainer Filitz

Technische Universität München, TUM School of Management

Joachim Henkel

TUM School of Management - Technical University of Munich (TUM)

Date Written: August 8, 2016

Abstract

We propose a unifying framework for the role of visible product design as a driver of interfirm competition, covering aspects of both value creation and value capture. We introduce the concept of “relative” product differentiation and theorize how design choices, by affecting consumer preferences through horizontal, vertical, and relative differentiation, codetermine firms’ market positions. We argue that psychological processes involved in comparative evaluations combine to generate quality spillovers, and develop a model of perceived product quality to analyze the conditions under which similarity to a competing design is beneficial. Regarding value capture from design, we suggest that consumer reactions to design similarity may act as natural barriers to imitation. In highlighting the competitive role of design, we corroborate its strategic relevance and unveil additional levers for creating competitive advantage.

Keywords: product design, competition, relative differentiation, value creation, value capture

JEL Classification: L15, O31, O34

Suggested Citation

Filitz, Rainer and Henkel, Joachim, Competing in Design: Differentiation, Imitation, and Value Capture (August 8, 2016). Available at SSRN: https://ssrn.com/abstract=2826391 or http://dx.doi.org/10.2139/ssrn.2826391

Rainer Filitz

Technische Universität München, TUM School of Management ( email )

Freising
Germany
+49-89-28925741 (Phone)
+49-89-28925742 (Fax)

HOME PAGE: http://www.tim.wi.tum.de

Joachim Henkel (Contact Author)

TUM School of Management - Technical University of Munich (TUM) ( email )

Arcisstr. 21
Munich, D-80333
Germany

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