Submarket Pioneering Using Users: Evidence from the U.S. Laser Industry

Abstract

In industries based on platform technologies, the ability to seize new market opportunities is central to firm growth and survival. Yet, little is known about the relative roles of users and producers in the process of pioneering submarkets in such industries. Using a novel dataset of a large population of firms, we document the role of producer collaboration with potential users in pioneering submarkets. We show that firms that collaborate with potential users are larger in scope, enter and thrive in emerging technological trajectories, survive longer, and have greater innovative output. The returns to such collaboration are greater for platform industries but are diminishing with the vintage of the technological trajectory within an industry. The results reflect that the locus of innovation is closer to some specialist suppliers in industries composed of submarkets than is documented in the user innovation literature, although users focus the search for submarkets. Ours is the first attempt to characterize the role of producer-user collaboration and organizational form innovation for firm success in industries characterized by submarkets.