HTSF Marketing and Customer Education: A Role for a Technology Awareness Programme?

Abstract

This article looks at the rationale for government-sponsored technology awareness programmes in very new areas of technology, with special reference to virtual reality technology. For some high technology small firms (HTSFs) operating in new areas, marketing costs can be high even before sales are made because the HTSF has to invest in educating customers. If the pioneering firm does not appropriate the benefits of this investment because it does not make a sale—but later entrants do—then there is a positive externality that may in principle give rise to market failure. The article examines the relevance of the three traditional sources of market failure in this context. It finds that market failure provides a less compelling rationale for proactive policy than more recent evolutionary analyses of path-dependence in technology diffusion. The article shows how the optimal design of a technology awareness programme depends on the underlying economic rationale for the programme.

Keywords:

• high technology small firms
• market failure
• path-dependence
• technology awareness programmes
• virtual reality