Working Paper: NBER ID: w30091
Authors: Joshua S. Gans
Abstract: Exploitation of disruptive technologies often requires resource deployment that creates conflict if there are divergent beliefs regarding the efficacy of a new technology. This arises when a visionary agent has more optimistic beliefs about a technological opportunity. Exploration in the form of experiments can be persuasive when beliefs differ by mitigating disagreement and its costs. This paper examines experimental choice when experiments need to persuade as well as inform. It is shown that, due to resource constraints, persuasion factors more highly for entrepreneurial than incumbent firms. However, incumbent firms, despite being able to redeploy resources using authority, are constrained in adoption as exploration cannot mitigate the costs of disagreement
Keywords: disruption; entrepreneurship; experimental choice; resource constraints
JEL Codes: L26; M1; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Resource constraints (D20) | Favoring 'raising the bar' experiments (C90) |
| Favoring 'raising the bar' experiments (C90) | Persuasion of resource providers (O36) |
| Incumbent firms' authority (L10) | Constraints in adoption of new technologies (O33) |
| Exploration cannot effectively mitigate costs of disagreement (D80) | Constraints in adoption of new technologies (O33) |
| Need for persuasion in entrepreneurial ventures (M13) | Check on authority of incumbent leaders (D73) |
| Check on authority of incumbent leaders (D73) | More frequent exploration and exploitation of disruptive technologies (O36) |
| More frequent exploration and exploitation of disruptive technologies (O36) | Higher risk of incurring disruption costs (G32) |