Chapter 12. Competitive Dynamics in High-technology Industries

Ram Mudambi[5] and Tim Swift[6]


Competition may be the most important determinant of firm performance. Industrial economics research has shown that firms not only compete with similar firms, but also with their buyers, sellers, and firms from other industries, and that those competitive forces explain a large portion of the variation in firm performance (Porter, 1980). The purpose of this chapter is to review the types of competition that exist in high-technology industries.

Literature in technology and innovation management has identified important ways in which high-tech firms compete. Some of the most well-recognized dimensions along which technology-based competition is waged include the choice of timing of entry, the nature of innovativeness (i.e., radical, incremental, or architectural), and the degree to which firms strive to establish the dominant design within their industries.

"First-mover" firms seek to enter markets first while "fast-followers" let other firms expend resources to build new markets and then conduct lower cost market entry later. Literature onfirst-mover advantage has yielded some surprising findings. Intuitively, one might expect that the firm that is first to exploit a new opportunity reaps the greatest rewards. Such first-mover firms have privileged access to new customers, and have the opportunity to be perceived by customers as a trend-setting firm. However, there is evidence ...

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