Experimental Choice and Disruptive Technologies

34 Pages Posted: 17 Aug 2021 Last revised: 23 Jan 2023

See all articles by Joshua S. Gans

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Date Written: January 23, 2023

Abstract

This paper examines how a firm's choice of the type of experiment impacts on its potential exploitation of new technological opportunities. It does so in the context of the failure of successful firms (or disruption) where the literature has informally suggested that firms undertake errors in experimental choice. It is shown that firms will generically choose experiments that minimise false positives (a high-bar) or minimise false negatives (a low-bar) rather than strike a balance between the two. This is done to better inform decisions regarding the exploitation of technological opportunities. It is shown that these choices can differ between incumbents and entrants based on their fundamentals as well as because of the anticipation of competition between them.

Keywords: disruption, innovation, bias, experiments, competition

JEL Classification: L26, O32

Suggested Citation

Gans, Joshua S., Experimental Choice and Disruptive Technologies (January 23, 2023). Rotman School of Management Working Paper No. 3890924, Available at SSRN: https://ssrn.com/abstract=3890924 or http://dx.doi.org/10.2139/ssrn.3890924

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

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Cambridge, MA 02138
United States

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