Dominant Design

In industries characterized by network externalities, the self-reinforcing effects of installed base and the availability of complementary goods can lead to a single (or few) firm(s) controlling nearly all of the market share in a product category. A new entrant may attempt to displace the incumbent standard by introducing a radically improved technology, "leapfrogging" the current generation, however it is argued here that a technological advantage alone is often not enough. To lure customers away from the existing standard, the new technology must somehow yield more value than the combination of value yielded by the incumbent technology’s functionality, installed base, and complementary goods. This paper develops a multidimensional framework of technology value components. This framework is then applied to data from case studies of three generations of competition in the U.S. video game industry to yield insight into what strategies a potential entrant can use to build actual, perceived, and expected sources of value to successfully leapfrog the incumbent, and what strategies an incumbent may use to defend its position.

This study examines the performance implications of the alliance networks of 49 firms that competed for two technology standards in the U.S. local area network industry from 1989 to 1996. During the race to define a dominant design, individual firms attract the suppliers of complements by building alliance networks to favor the firms’ preferred technology standard. Controlling for the number of suppliers in each technology standard community and the extent of technical progress achieved by individual firms, the panel data analysis shows that central firms with high ego network density, coupled with a strategic intent to acquire and share knowledge broadly within the technological community, achieve better innovation performance. The size of the technological community and some random events in the early formation of the industry do not provide a sufficient explanation of how these firms gain the diverse support of suppliers or enhance their competitive advantage. By demonstrating the independent and contingent effects of alliance network properties, this study explains how network patterns might enhance or limit the benefits of alliance networks when focal firms embrace different innovation strategies.

The notion of dominant designs refers to dominance in the market, hence the literature on dominant designs ignores the selection process that already takes place in pre-market R&D stages of technological innovation. In this paper we address the question to what extent pre-market selection takes place within an industry and how this may lead to dominance of one design over others before the market comes into play. Furthermore we study what selection criteria apply in the absence of actual market criteria. We do so through a historical analysis of design paths for hydrogen passenger cars.

We argue that prototypes are used by firms in their internal search process towards new designs and at the same time as means of communicating technological expectations to competitors and outsiders. In both senses, prototypes can be taken as indicators of design paths in the ongoing search process of an industry.

We analyzed the designs of prototypes of hydrogen passenger cars from the 1970s till 2008. A database is compiled of 224 prototypes of hydrogen passenger cars, listing the car's manufacturer, year of construction, hydrogen conversion technology, fuel cell type, and capacity of its hydrogen storage system. The analysis shows to what extent one design gained dominance and which strategies were adopted by the firms in their search processes.

We conclude that indeed a dominant prototyping design has emerged: the fuel cell combined with high pressure gaseous storage. Actual and expected performance acted as selection criterion, but so did regulation and strategic behaviour of the firms. Especially imitation dynamics, with industry leaders and followers, is a major explanatory factor. Our main theoretical claim is that the selection of a dominant prototyping design is based on an interaction of sets of expectations about future performance of technological components and regulatory pressure that results in herding behaviour of the firms.

This paper discusses the design of observer-based reduced order controllers for the stabilization of large scale linear discrete-time control systems. This design is carried out via deriving a reduced-order model for the given linear plant using the dominant state of the linear plant. Using this reduced-order linear model, sufficient conditions are derived for the design of observer-based reduced order controllers. A
separation principle has been established in this paper which demonstrates that the observer poles and controller poles can be separated and hence the pole-placement problem and observer design are independent of each other.