Article ID: | iaor199629 |
Country: | United States |
Volume: | 41 |
Issue: | 2 |
Start Page Number: | 209 |
End Page Number: | 225 |
Publication Date: | Feb 1995 |
Journal: | Management Science |
Authors: | Conner Kathleen R. |
Keywords: | marketing, manufacturing industries |
An important business strategy research theme concerns finding ways to minimize competition faced by the firm. This paper, however, focuses on a different set of situations: the model developed suggests that an innovator’s best strategy may be to encourage ‘clones’ of its product when a network externality is present. Key factors to consider in assessing whether encouraging cloning is the innovator’s best strategy are: (1) the benefit to be derived in terms of added user base ‘contributed’ by the clone sales, traded-off against (2) the unit sales that will be lost to the clone(s). These factors in turn depend upon the strength of the network effect and the degree to which the innovator’s product quality is perceived by consumers to be superior to the clone’s. The model further suggests that both the innovator and clone earn their highest payoffs when the