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Integration and Cospecialization of Emerging Complementary Technologies by Startups

By Edward G. Anderson and Geoffrey G. Parker

Abstract

We analyze the market entry problem faced by startups that must integrate their service or product with one or more complementary technologies. The problem is especially challenging when the complementary technologies have large but uncertain cost reduction potentials. The market for intermittent renewable power generation (e.g., wind, solar) combined with storage (e.g., battery, pumped reservoir, flywheel) provides a motivating context. Renewable generation technologies are immature; thus storage startups face high risks when making R&D investments to integrate with them. The entrepreneurship literature often suggests that startups should pursue focused strategies for various reasons, including bounded rationality and budget constraints. This literature generally overlooks startups entering markets with complementary technologies. The advice for mature firms investing in complementary technologies is often to diversify their investment across multiple complements to manage technological uncertainty. Given competing guidance, we seek to extend the entrepreneurship literature by modeling startups ’ entry decisions for markets in which complementary technologies exhibit strong learning effects

Topics: startups, entrepreneurship, complements, integration, learning curve, externalities, power storage, power generation, renewables
Year: 2012
OAI identifier: oai:CiteSeerX.psu:10.1.1.352.8590
Provided by: CiteSeerX
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