Abstract
In most markets, higher technological quality directly translates into higher consumer utility. However, many new products do not work standalone but require the availability of a complementary product. In these markets, pushing a
product closer to the technological frontier can have detrimental effects as this excludes increasing numbers of consumers whose complementary products no longer function with the focal product. Firms therefore have to balance product quality against market size. Technological change brings a dynamic perspective to this tradeoff as it renders existing technology obsolete but also increases performance of the complementary products, therefore increasing market potential. We study these mechanisms in the empirical context of computer games. In line with our expectations, we find an inverted U-shaped relationship between closeness to the frontier and sales revenues as well as differential
effects of technological change depending on initial technological quality.
product closer to the technological frontier can have detrimental effects as this excludes increasing numbers of consumers whose complementary products no longer function with the focal product. Firms therefore have to balance product quality against market size. Technological change brings a dynamic perspective to this tradeoff as it renders existing technology obsolete but also increases performance of the complementary products, therefore increasing market potential. We study these mechanisms in the empirical context of computer games. In line with our expectations, we find an inverted U-shaped relationship between closeness to the frontier and sales revenues as well as differential
effects of technological change depending on initial technological quality.
| Original language | English |
|---|---|
| Publication date | Jun 2013 |
| Number of pages | 32 |
| Publication status | Published - Jun 2013 |
| Event | The 35th DRUID Celebration Conference 2013: Innovation, Strategy and Entrepreneurship: Competitiveness and Dynamics of Organizations, Technologies, Systems and Geography - ESADE Business School, Ramon Llull University, Barcelona, Spain Duration: 17 Jun 2013 → 19 Jun 2013 Conference number: 35 http://druid8.sit.aau.dk/registrant/index/login/cid/13 |
Conference
| Conference | The 35th DRUID Celebration Conference 2013: Innovation, Strategy and Entrepreneurship |
|---|---|
| Number | 35 |
| Location | ESADE Business School, Ramon Llull University |
| Country/Territory | Spain |
| City | Barcelona |
| Period | 17/06/2013 → 19/06/2013 |
| Other | The DRUID Society Conference 2013 |
| Internet address |