Entry-Timing Effects and Opportunity Costs in Generational Technology Adoption

Abstract

Several decades of research on the effects of market entry timing has concluded that entry timing matters, there are often first-mover advantages but it is still somewhat unclear why and when. I notice that entry effect literature has paid surprisingly little attention to the issue that a market entry is not an isolated event but part of firm’s larger market and product portfolio decision. Many of the firm’s valuable resources – such as R&D or management – cannot be scaled freely, but firms have to decide how to allocate them between different growth opportunities such as introducing a new product, entering to a new geographical market, or pursuing growth in existing markets. Thus, each entry decision has an opportunity cost of forgoing other possible growth opportunities. Particularly relevant this is for generational products – such as PC computers – where the old and new product generations often rely on same resources that cannot be scaled but have to be allocated between the product generations. In t...