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Dominant designs, innovation shocks, and the follower's dilemma
Author(s) -
Argyres Nicholas,
Bigelow Lyda,
Nickerson Jack A.
Publication year - 2015
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2207
Subject(s) - dilemma , industrial organization , business , economics , process management , marketing , epistemology , philosophy
A dominant design is thought to usher in a period of intense competition based on cost, causing an often‐fierce industry shakeout. We aim to challenge the foundations of the dominant design literature, and develop new insights about the evolution of competition. We argue that strategic repositioning and elevated exit rates are often observed long before the emergence of a dominant design, and that a key cause is the introduction of a particular product for which demand is unexpectedly high (an “innovation shock”). This introduction creates a dilemma for followers, which we suggest is resolved based on followers' comparative adjustment costs. We test implications of these ideas on data from the early U.S . auto industry, treating F ord's M odel T as the innovation shock . Copyright © 2013 John Wiley & Sons, Ltd.