Strategic Process And Product Innovation

Abstract

The study analyzes the timing of process and product innovations. A dynamic product differentiation model illustrates strategic interaction in a duopoly. Firms use asymmetric equilibrium strategies for the adoption of innovations, i.e. innovations are adopted sequentially. The priority of process innovation over product innovation depends on the relative magnitude of the two innovations. Empirical evidence from the semiconductor industry illustrates asymmetric adoption patterns for innovations.

Keywords:

• Product and process innovation
• game theory
• semiconductor industry J.E.L. classification: L19, 031

^∗The views expressed here are of the author and do not necessarily reflect those of the EIB.The author would like to thank to Mr. Bruno Beverina of SGS-Thomson for discussing technical details on the semiconductor industry. Thanks also to the two referees of EINT for their helpful comments. The usual disclaimer applies.

^∗The views expressed here are of the author and do not necessarily reflect those of the EIB.The author would like to thank to Mr. Bruno Beverina of SGS-Thomson for discussing technical details on the semiconductor industry. Thanks also to the two referees of EINT for their helpful comments. The usual disclaimer applies.

Notes

^∗The views expressed here are of the author and do not necessarily reflect those of the EIB.The author would like to thank to Mr. Bruno Beverina of SGS-Thomson for discussing technical details on the semiconductor industry. Thanks also to the two referees of EINT for their helpful comments. The usual disclaimer applies.