Technological Evolution and Launch Timing: An Analysis of the Time-Quality Trade-Off Under Competition
34 Pages Posted: 27 Feb 2006 Last revised: 2 Oct 2018
Date Written: February 2006
In many technology-intensive industries, the quality of products offered by firms is constrained by the evolution of a core technology. Therefore, incorporating advanced technologies in new products entails delayed product introduction. However, an early launch of a new product provides a firm several enduring advantages such as larger market presence and greater availability of complements. In this work, we try to identify the strategic factors that drive launch-timing decisions under competition. Specifically, we model the entry timing decisions made by two competing firms that face different technological trajectories. By endogenizing the competitive environment as an outcome of entry decisions, we characterize equilibria in the Product Launch Game under a variety of market conditions. We find that competing firms often take different roles as early leaders or technology leaders by entering a market at different times; this allows them to utilize entry timing as an additional dimension to differentiate themselves from their rival. We also analyze the impact of technological trajectories and market factors such as network effects and growth potential on the profitability of various entry strategies. We show that these factors can affect a firm's equilibrium profits in a counter-intuitive fashion. One of our interesting conclusions is that the level of competition in an industry moderates the significance of different factors that influence equilibrium entry strategies. As a result, firms that fail to understand the extent of competition might emphasize the wrong dimensions in making entry decisions.
Keywords: time-to-market, competition, technology trajectories, entry/launch timing, network effects
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