The Curse of Innovation: A Theory of Why Innovative New Products Fail in the Marketplace
John T. Gourville
Harvard Business School
HBS Marketing Research Paper No. 05-06
Highly innovative products fail in the marketplace at significant rates. In this paper, we offer a behavioral framework to explain this failure. We begin with the behavior change inherent in most innovations. We then add reference dependence and loss aversion, arguing that the typical consumer is endowed with the entrenched alternative and the typical developer is entrenched with their innovation. As a direct result, consumers tend to undervalue and developers tend to overvalue such an innovation relative to the existing option. This is the "curse of innovation" and it systematically increases the likelihood of failure for a highly innovative new product.
Number of Pages in PDF File: 36
JEL Classification: M31, O31, O32, O33
Date posted: August 5, 2005