The Handbook of Technology and Innovation Management

2.3. New Product Entry Strategy and Competitor Response

A new product's market success depends on its entry strategy as well as the response of incumbents to its entry (Gatignon and Reibstein 1997; Venkatraman, Chen, and MacMillan 1997).^[] The determinants of new product entry strategy, its interrelationship with competitor response, and the drivers of competitor response can be analyzed through the framework that appears in Figure 2.3. This framework is adapted from Shankar (1999). According to this framework, a new product's entry strategy and competitor response are determined by entrant, incumbent, and market/industry characteristics. A new product entry strategy is reflected by decisions on marketing variables such as product line length, price, advertising, and distribution.^[].

^[] The literature on order of market entry is extensive, but because our focus in this section is not on order of entry effects, but on new product marketing strategy, we do not review that literature (for a recent review of order of entry effects in physical and electronic markets, see Varadarajan, Yadav, and Shankar, 2008).

^[] To keep the scope of this chapter manageable, we do not consider partnering strategies adopted by new firms entering a market (see Shane, Shankar, and Aravindakshan, 2006, for a review of such partnering strategies)

2.3.1. New product introduction strategy

Eliashberg and Jeuland (1986) formulate an optimal pricing strategy of a firm that introduces a new durable first and anticipates ...