Disruptive innovation, market entry and production flexibility in heterogeneous oligopoly

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dc.contributor.author Chevalier‐Roignant, Benoît
dc.contributor.author Flath, Christoph M.
dc.contributor.author Trigeorgis, Lenos
dc.date.accessioned 2019-12-10T16:39:50Z
dc.date.available 2019-12-10T16:39:50Z
dc.date.issued 2019-01-18
dc.identifier.citation Chevalier-Roignant B, Flath CM, Trigeorgis L. (2019) Disruptive innovation, market entry and production flexibility in heterogeneous oligopoly. Production and Operations Management, Volume 28, Issue 7, July 2019, pp. 1641-1657 en_UK
dc.identifier.issn 1059-1478
dc.identifier.uri https://doi.org/10.1111/poms.12995
dc.identifier.uri http://dspace.lib.cranfield.ac.uk/handle/1826/14819
dc.description.abstract We develop a model of oligopoly competition involving innovation effort, market entry and production flexibility under demand uncertainty. Several heterogeneous firms make efforts to develop new prototypes; if they succeed, they hold a shared option to enter a new market under stochastic demand. We derive analytic results for the Markov perfect equilibrium accounting for development effort, market entry and production decisions and complement these by numerical analyses. Firm value—which embeds real options—is not convex increasing in demand but exhibits “competitive waves” due to market entries by rivals. A firm with a development advantage (“innovator”) exerts greater innovation effort if the market is a niche, whereas another benefiting from economies of scale (“incumbent”) invests more if the market is larger. Positive externalities benefit the incumbent in the development stage, whereas the innovator is better off in counteracting negative externalities. Demand volatility raises firm incentives to innovate as it enhances the value of firm market‐entry and production flexibility. en_UK
dc.language.iso en en_UK
dc.publisher Wiley en_UK
dc.rights Attribution 4.0 International *
dc.rights.uri http://creativecommons.org/licenses/by/4.0/ *
dc.title Disruptive innovation, market entry and production flexibility in heterogeneous oligopoly en_UK
dc.type Article en_UK
dc.identifier.cris 22513355

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