Process technologies, learning and brand proliferation

This paper examines a firm's choice between a production system of product dedicated equipment and a technology which generates opportunities for learning with respect to new product introductions. Examples of the latter, new technologies include flexible manufacturing systems and computer aided design and manufacturing equipment. The market/technology conditions under which these technologies facilitate brand proliferation are shown. It is discovered that when the market is small and/or demand is elastic, the equilibrium behavior of the firm using the new technology will be to introduce enough new products to the market to drive out the other firm. Thus, technologies that generate such learning effects at a fixed cost can be used in gaining strategic advantage in competitive markets.