Exploration and Exploitation in the Presence of Network Externalities

This paper examines the conditions under which exploration of a new, incompatible technology is conducive to firm growth in the presence of network externalities. In particular, this study is motivated by the divergent evolutions of the PC and the workstation markets in response to a new technology: reduced instruction set computing (RISC). In the PC market, Intel has developed new microprocessors by maintaining compatibility with the established architecture, whereas it was radically replaced by RISC in the workstation market. History indicates that unlike the PC market, the workstation market consisted of a large number of power users, who are less sensitive to compatibility than ordinary users. Our numerical analysis indicates that the exploration of a new, incompatible technology is more likely to increase the chance of firm growth when there are a substantial number of power users or when a new technology is introduced before an established technology takes off.
Publisher
Informs
Issue Date
2003-04
Language
ENG
Keywords

LOCK-IN; COMPATIBILITY; INNOVATION; MODEL; TECHNOLOGIES; COMPETITION; INDUSTRY; HISTORY; FACES

Citation

MANAGEMENT SCIENCE, v.49, no.4, pp.553 - 570

ISSN
0025-1909
URI
http://hdl.handle.net/10203/4395
Appears in Collection
MT-Journal Papers(저널논문)
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