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When Technologies Compete: The Role of Externalities in Nonlinear Market Response
Author(s) -
Redmond William H.
Publication year - 1991
Publication title -
journal of product innovation management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.646
H-Index - 144
eISSN - 1540-5885
pISSN - 0737-6782
DOI - 10.1111/1540-5885.830170
Subject(s) - externality , luck , economics , nonlinear system , product (mathematics) , network effect , industrial organization , microeconomics , yield (engineering) , philosophy , physics , geometry , theology , mathematics , materials science , quantum mechanics , metallurgy
When competing technologies are introduced at about the same time, they may either share the market for an extended period or one may eventually dominate the other. Using actual data from the VCR market, William Redmond explores product and market conditions that favor the emergence of a dominant technology. Recent developments in the theory of nonlinear economic processes yield straightforward models of the dominant or all‐or‐nothing response pattern. In this study, the role of externalities, or infrastructure, emerges as a critical determinant in producing the nonlinear market response pattern. One intriguing aspect of nonlinear market processes is a propensity for small, outside influences to exercise a powerful and long‐term influence on market response, that is, “luck” may play a role in these models.