Dominant designs, innovation shocks, and the follower's dilemma

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...

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Bibliographic Details
Published in:Strategic management journal 2015-02, Vol.36 (2), p.216-234
Main Authors: Argyres, Nicholas, Bigelow, Lyda, Nickerson, Jack A.
Format: Article
Language:English
Subjects:
Comparative analysis
Competition
dominant design
Economic analysis
Economic shock
industry evolution
industry shakeout
Innovation
Management theory
Product introduction
Repositioning
Strategic management
strategic positioning
Studies
U.S.A
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Summary: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 Ford's Model Tas the innovation shock.
ISSN:0143-2095
1097-0266
DOI:10.1002/smj.2207