Resource title

Technology evolution and demand heterogeneity: implications for product and process innovation

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While research on the evolution of new technologies has emphasized the "supply side" activities of firms, there is a growing recognition that the external demand environment can exercise significan influence over these activities. This paper presents a demand-based view of technology evolution that is focused on the interaction between technology development and the demand environment in which the technology is ultimately evaluated. The authors develop a formal model that explicity considers the influence of heterogeneity in market demand -the presence of consumers with different needs and requirements- on firms' innovation choices. The model is analysed using computer simulation. The model is used to examine the dynamics of product and process innovation. The analysis reveals that demand heterogeneity offers and alternative to supply-side explanations of the technology life cycle. Further, by considering the possibility in the technology life characterized by increasing performance at a stable price. This stage has not yet been treated formally in the literature, but is increasingly evident in digital and information based technologies.

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en

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application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp1999/99-74.pdf

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Copyright INSEAD. All rights reserved