Publication

2005 - Division of Research, Harvard Business School, Boston, Massachusetts

Language

English

Word Count

8,500 words, Guess

Page Count

34 pages

Identifiers

Description

Highly innovative products fail in the marketplace at significant rates. In this paper, we offer a behavioral framework to explain this failure. We begin with the behavior change inherent in most innovations. We then add reference dependence and loss aversion, arguing that the typical consumer is endowed with the entrenched alternative and the typical developer is entrenched with their innovation. As a direct result, consumers tend to undervalue and developers tend to overvalue such an innovation relative to the existing option. This is the "curse of innovation" and it systematically increases the likelihood of failure for a highly innovative new product.

Subjects

Series Statement

  • Working paper / Division of Research, Harvard Business School -- 06-014

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