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HTSF Marketing and Customer Education: A Role for a Technology Awareness Programme?
Abstract
This article looks at the rationale for government-sponsored technology awareness programmes in very new areas of technology, with special reference to virtual reality technology. For some high technology small firms (HTSFs) operating in new areas, marketing costs can be high even before sales are made because the HTSF has to invest in educating customers. If the pioneering firm does not appropriate the benefits of this investment because it does not make a sale—but later entrants do—then there is a positive externality that may in principle give rise to market failure. The article examines the relevance of the three traditional sources of market failure in this context. It finds that market failure provides a less compelling rationale for proactive policy than more recent evolutionary analyses of path-dependence in technology diffusion. The article shows how the optimal design of a technology awareness programme depends on the underlying economic rationale for the programme.
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Notes And References
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At the time of writing there is a strong possibility that the DTI will launch such an awareness programme for VR in the UK.
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Three case studies of VR applications are described in G.M.P. Swann, N.R. Pandit & T. Watts, The Business Payoff from VR Applications: Pilot Case Studies of Space Planning and Training, Report for Department of Trade and Industry, London, 1997.
T. Watts, G.M.P. Swann & N.R. Pandit, ‘VR and innovation potential’, paper delivered at the R&D Management Conference, Manchester, UK, 14–16 July 1997, elucidate the benefits of this type of application.
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Oakey, op. cit., Ref. 2; Oakey et al., op. cit., Ref. 2.
J. S. Metcalfe, ‘The economic foundations of technology policy: equilibrium and evolutionary perspectives’, in P. Stoneman (ed.), Handbook of the Economics of Innovation and Technological Change, Blackwell, Oxford, 1995, offers a valuable comparison of the equilibrium and evolutionary approaches to technology policy.
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Arthur, op. cit., Ref. 18.
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Cowan, op. cit., Ref. 20.
E. M. Rogers, ‘Information exchange and technological innovation’, in D. Sahal (ed.), The Transfer and Utilisation of Technical Knowledge, D.C. Heath, Lexington, KY, 1982, pp. 105–123.
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The reference is to R. Stone of VR Solutions Ltd. Stone's work is unpublished, and we are grateful to him for allowing us access to it.
J. Farrell & G. Saloner, ‘Competition, compatibility and standards: the economics of horses, penguins and lemmings’, in H.L. Gabel (ed.), Product Standardisation and Competitive Strategy North-Holland, Amsterdam, 1987, pp. 1–21.
The analogy with penguins arises because hungry penguins will line up at the water's edge, reluctant to jump in lest there be predators lurking in the water. But when one penguin has jumped in, and is enjoying its meal of fish in safety, then the others rapidly follow!
P.L. Stoneman & P.A. David, ‘Adoption subsidies vs information provision as instruments of technology policy’, Economic Journal, 96, Supplement, 1986, pp. 142–150.
P. Stoneman & M.J. Kwon, ‘Technology adoption and firm profitability’, Economic Journal, 106, 1996, pp. 952–962.
Stoneman & David, op. cit., Ref. 30.
D. Mowery, ‘The practice of technology policy’, in P. Stoneman (ed.), Handbook of the Economies of Innovation and Technological Change, Blackwell, Oxford, 1995, also compares these two approaches.
Swann et al., op. cit., Ref. 8.
Mowery, op. cit., Ref. 33 gives some further details of awareness programmes in other countries.
Swann et al., op. cit., Ref. 8.
Swann, op. cit., Ref. 26.
Ibid.