Factors affecting the take-off of innovative technologies: evidence from digital cameras

Abstract

While technological innovations are important for many industries, take-off sales for innovative products can have long lead times due to a variety of factors. This article identifies the main parameters affecting digital camera take-off sales in the US between 2001 and 2004. The study constructs an empirical model for film and digital camera shipments and finds that digital cameras primarily served as a substitute for low-end film compacts rather than high-end film Single-Lens Reflex (SLR) cameras. Also, growth in household PC ownership and Windows XP market share were the main contributing factors to the decline of film cameras, with PC penetration rate as the most important factor for digital camera diffusion.

Keywords:

• digital cameras
• innovation
• sales take-off
• augmenting products

JEL Classification:

• L10
• C10

Notes

¹ We thank the anonymous reviewer for pointing these out for us.

² 2004–2005 PMA Industry Trends Report Retail Markets – a performance and trends analysis of the US imaging industry.

³ This was likely due to a combination of three reasons. First, digital imaging technology was not yet sufficiently advanced. Early digital cameras generally had low resolution and the picture quality was inferior to SLR film cameras. The first 4-megapixel digital camera was not available until 2001 and sold at a significant price. Also, certain optical effects could only be produced by SLR film cameras, limiting adoption by photographers with special needs. As reported in the 2005 PMA US Consumer Buying Report, digital SLR cameras only accounted for 4% of total digital camera sales during our study period. Second, serious photographers typically own both an SLR film camera and a digital camera, suggesting that digital cameras may not be a perfect substitute product. Third, finer resolution also produces a larger picture file size, but larger storage mediums (flash cards, hard disk drives, etc.) were not yet available at affordable prices. These external factors restricted the popularity of digital cameras and prevented them from directly competing with SLR film cameras.