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Eng Book- THE MARKET EVOLUTION AND SALES TAKE-OFF OF PRODUCT INNOVATIONS- Download Free PDF


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In contrast to the prevailing supply-side explanation that price decreases are the key
driver of a sales take-off, we argue that outward shifting supply and demand curves lead to
market take-off. Our fundamental idea is that sales in new markets are initially low since the
first commercialized forms of new innovations are primitive. Then, as new firms enter, actual
and perceived product quality improves (and prices possibly drop) which leads to a take-off in
sales. To provide empirical evidence for this explanation, we explore the relationship between
take-off times, price decreases, and firm entry for a sample of consumer and industrial product
innovations commercialized in the US over the past 150 years. Based on a proportional
hazards analysis of take-off times, we find that new firm entry dominates other factors in
explaining observed sales take-off times. We also find no evidence that price mediates the
relationship between firm entry and take-off time. We interpret these results as supporting the
idea that demand shifts during the early evolution of a new market due to non-price factors is
the key driver of a sales take-off.
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