This dissertation is comprised of three essays. The first, “Optimal Marketing Strategies for Competing New Ventures in a Nascent Industry” has been originally accepted for publication in the International Journal of Entrepreneurship and Innovation Management. It considers new ventures that are pioneering a nascent industry. Just as their established counterparts do, these ventures strive to increase profit by acquiring sales of rival new ventures. However, new ventures can also grow by attracting unrealized sales. The essay investigates the resulting tradeoff in marketing expenditures via a differential game between two competing new ventures. Extensive numerical analysis suggests that an increase in a new venture’s unit profit margin, effectiveness in gaining new sales, or initial sales level, but a decrease in sales decay, may cause a positive spillover for its rival.
The second essay, “Integrating Customer Preferences with Technology Adoption and Product Redesign in a Duopoly” focuses on a firm’s decision to add a technology that changes how customers interact with the firm’s product. We formulate a two-stage game-theoretic framework to investigate the conditions under which two competing firms should add a technology, and how a firm that adopts technology should redesign its product to incorporate technology. We investigate how prospective and existing customers’ preferences for the technology and the product-technology fit should affect the firm’s adoption and product redesign decisions. We articulate conditions for the existence of a Nash equilibrium where both firms add technology, and demonstrate that customer preferences for technology standardization may actually impede standardization.
The third essay, “New Product Positioning for a Segmented Market” focuses on how competing firms should set price and quality for a new technologically-advanced product. The targeted market is comprised of two customer segments that differ in innovativeness. We analyze a closed-loop Stackelberg game with perfect information and find that a late entrant’s ability to challenge an incumbent is most affected by production cost. If a firm has a large enough production cost advantage relative to its rival, it can attract customers from both segments; however, such a firm should not necessarily be the first mover.