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Title: Exploration and exploitation in the presence of network externalities
Authors: Lee, JH
Lee, JS
Lee, H
Keywords: Network externalities;Exploration and exploitation;Innovation;Technology
Issue Date: 2003
Publisher: INFORMS
Citation: Management Science 49 (4): 553-570, Apr 2003
Abstract: This paper examines the conditions under which exploration of a new, incompatible technologyis conducive to firm growth in the presence of network externalities. In particular, this studyis motivated bythe 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 bymaintaining compatibilitywith the established architecture, whereas it was radicallyr eplaced byRISC 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 compatibilitythan ordinaryusers. Our numerical analysis indicates that the exploration of a new, incompatible technologyis more likelyto increase the chance of firm growth when there are a substantial number of power users or when a new technologyis introduced before an established technologytakes off. (; ; ; )
ISSN: 1526-5501
Appears in Collections:Business and Management
Brunel Business School Research Papers

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