Disruptive innovation, market entry and production flexibility in heterogeneous oligopoly

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dc.contributor.authorChevalier‐Roignant, Benoît
dc.contributor.authorFlath, Christoph M.
dc.contributor.authorTrigeorgis, Lenos
dc.date.accessioned2019-12-10T16:39:50Z
dc.date.available2019-12-10T16:39:50Z
dc.date.issued2019-01-18
dc.description.abstractWe 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.identifier.citationChevalier-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. 1641-1657en_UK
dc.identifier.cris22513355
dc.identifier.issn1059-1478
dc.identifier.urihttps://doi.org/10.1111/poms.12995
dc.identifier.urihttp://dspace.lib.cranfield.ac.uk/handle/1826/14819
dc.language.isoenen_UK
dc.publisherWileyen_UK
dc.rightsAttribution 4.0 International*
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/*
dc.titleDisruptive innovation, market entry and production flexibility in heterogeneous oligopolyen_UK
dc.typeArticleen_UK

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