Cost–benefit model for multi-generational high-technology products to compare sequential innovation strategy with quality strategy

In the rapidly changing high-tech industry, firms that produce multi-generational products struggle to consistently introduce new products that are superior in innovativeness. However, developing innovative products in a short time sequence period is likely to cause quality problems. Therefore, considering time and resource constraints, two kinds of strategies are commonly employed: sequential innovation strategy, sequentially introducing a new generation of technology product at every launch interval, ensuring timely innovativeness but with relatively uncertain quality, or quality strategy, intermittently introducing a new generation of products, together with a derivative model between generations to enhance the quality. In this study, we propose a framework for a cost–benefit analysis that compares these two strategies by considering competition between firms within a generation as well as that within a firm across multiple generations (i.e., cannibalization) throughout the launch cycle of high-tech products. We apply our proposed framework to the smartphone market and conduct a sensitivity analysis. The results are expected to contribute to strategic decision-making related to the introduction of multi-generational technology products.

Quantifying the Effects of Patent Protection on Innovation, Imitation, Growth, and Aggregate Productivity

I develop a general equilibrium model in which patent protection can increase or decrease the costs of sequential innovation, original innovation, and imitation. Depending on these relative effects, protection can in theory increase or decrease markups, imitation, innovation, growth, and aggregate productivity. I discipline the model using data from several different sources, and find that weakening protection in the U.S. would lead to no change in markups and imitation, no change in long-run growth, a significant increase in the number of firms, and an increase in aggregate productivity of 11%.

Effects of the Sharing Economy on Sequential Innovation Products

The emergence of the sharing economy has affected consumers and traditional manufacturers. We focus on product sharing and analyze its impacts on the manufacturer that offers sequential innovation products. We develop a two-period model in which a monopoly manufacturer sells an old product and introduces a new product in each period; in the same period, an owner who bought a product for self-use from the manufacturer in the previous period may rent the product out because of the low self-use value in this period. Our analysis reveals that the sharing market increases or decreases the manufacturer’s profit, and this is mainly determined by the moral hazard cost and the salvage value of sharing products. Furthermore, the sharing market has an insignificant effect on the upgrading of products, but there is a bumping-down effect on old products’ sales. Finally, the effect of the sharing market on the revenue of the owner and the sharing platform mostly depends on the risk of moral hazard, and it also affects the manufacturer’s product rollover strategy.