Accelerating Innovations: When Do they Pay off?

Accelerated innovations occur frequently, as (a) time to introduction of subsequent generations decreases; or (b) innovations diffuse faster. Although generally viewed as a chance rather than a threat, accelerated innovations are not necessarily beneficial, because decreased time to introduction does not always accompany accelerated diffusion. In this light, we investigate the effects of accelerated innovations on the profitability of a first generation innovation (G1) replaced by G2. A case study on the DRAM industry provides the basis for a Monte Carlo simulation, which considers combinations of diffusion, cost, and price parameters. Costs and diffusion of G1 influence its profitability most. Interestingly, G2 diffusion parameters are much less influential; the mere early introduction is more decisive on the profitability of G1.