Experimental Choice and Disruptive Technologies

This paper examines how a firm's choice of the type of experiment impacts on its potential exploitation of new technological opportunities. It does so in the context of the fail-ure of successful firms (or disruption) where the literature has informally suggested that firms undertake errors in experimental choice. It is shown that firms will generically choose experiments that minimize false positives (a high-bar) or minimize false negatives (a low -bar) rather than strike a balance between the two. This is done to better inform decisions regarding the exploitation of technological opportunities. It is shown that these choices can differ between incumbents and entrants based on their fundamentals and because of the anticipation of competition between them.

Automated summary

This paper examines how a firm's choice of experiment type affects its ability to exploit new technological opportunities. It shows that firms tend to choose experiments that minimize false positives (a high-bar) or minimize false negatives (a low-bar), rather than striking a balance between the two. These choices differ between incumbents and entrants based on their fundamentals and anticipation of competition.