Value Appropriation and Teece
14 important questions on Value Appropriation and Teece
What are increasing retruns advantages?
What are the first mover disadvantages?
- First movers have higher failur rates (47%) and lower market shares than early followers (10% vs. 30%)
- Later entrants can also adopt newer and more efficient production processes
- First movers may earn greater revenues but also may have higher costs, with the result that they may earn significantly lower profits over time.
What are the costs incurred by first movers that are nonexistent or greatly reduced for followers?
- Expenditures on R&D
- Development of supply and distribution channels
- Development of enabling technologies
- Development of complementary goods and services
- Product trials to determine what features consumers actually prefer
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Why are research and development expenses for the first mover higher than those for later entrants?
- Their exploration costs are higher (they have to pay for research that did not result in a commercially viable product)
- They bear the cost of developing production processes and complementary goods that later entrants can leverage without the usually very large upfront investment made by the first mover
Why does the belief in first mover advantages persist?
How to capture value? (Teece)
- Nature of technology, knowledge
- Dominant design
- Complementary assets
- Strength of legal protection/knowledge protection
- Lead time
(1-4 = Teece)
What is meant with the nature of technology/knowledge?
- Tacit or codified
- Process or product innovation
- Causal ambiguity
Which phases has the dominant design?
- Fluid phase
- Transitional phase
- Specific phase
Why do many markets coalesce around a single dominant design rather than supporting a variety of technological options?
- Learning affects the improvement rate of a technology.
- Network externalities that result when there are increasing returns to adoption.
- Complementary product creation often occurs at a faster rate as adoption becomes more widespread.
How does learning affects the improvement rate of a technology?
How can small historical events have a large effect on the form of the technology adopted as the dominant design?
- Early entrants and their technology may become so entrenched that subsequent, superior technologies, may be unable to gain a foothold in the market.
- Sponsorship by a large powerful firm can help a technology gain a controlling share of the market, locking out of alternative and potentially superior technologies.
When are governments most likely to intervene?
Acquiring complementary assets?
- Critical importance?
- Time needed to acquire
- Investment required
- Core capabilities
Which forms of legal protection are there?
- Copyrights
- Patents
- Trademarks
- Design patents
- Plant patents
- Trade secrets
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