Vicarious Learning in New Product Introductions in the Early Years of a Converging Market

Abstract

Technological developments are combining previously distinct technologies resulting in converging markets. In converging markets, firms from different industries compete against each other, often for the first time. We propose that firms introducing new products in converging markets will learn vicariously from other firms in the market. Further, we propose that this learning will vary across the dual technology frontier, where the high and low technology frontier map onto innovative activities driven by technological opportunity and user needs, respectively. We propose that at the high technology frontier, local search will dominate and firms will be influenced by high technology frontier product introductions of similarly-sized and successful firms. At the low technology frontier, learning will occur across the dual technology frontier, vary by origin industry of the firm and be affected by complementarities in routines and capabilities and market competition among firms. We test the proposed model of vicarious learning using panel data on new product introductions of 67 firms in the U.S. digital camera market in the 1990's. Findings generally support our proposed model of vicarious learning in this market. They show heterogeneity in vicarious learning across the technology frontier and firm characteristics -- including the origin industry of target firms. Our results show that vicarious learning in new product introductions in converging market, which includes both mimetic and non-mimetic learning, is similar in some ways, but different in other ways from vicarious learning in more traditional markets. We conclude with a discussion of the implications of our findings for theories of organizational learning, new product development and converging markets.

Keywords: vicarious learning, new product introductions, converging markets, technology frontier, count models, Bayesian estimation