Strategic market entry and innovation for asymmetric 3C electronics firms in complementary markets

DOI number:10.1016/j.eswa.2026.131828

Journal:Expert Systems with Applications

Abstract:This paper examines the optimal market entry strategies and innovation level decisions of asymmetric technology firms in the 3C Electronics industry as they consider expansion into complementary markets. We develop a Stackelberg game-theoretic model that explicitly incorporates product quality differentiation, technological spillovers, innovation costs, and market entry costs across two interrelated markets. Our analysis reveals several key findings. First, market entry generates positive spillover effects on prices, demand, and profits, accompanied by a free-rider effect. Notably, the low-tech firm can surpass the high-tech firm in market share only if the latter does not enter and complementary market demand is sufficiently high. Second, while higher innovation cost coefficients and market entry costs generally discourage entry, the optimal innovation level is not always maximal and also depends on the competitor’s entry decision. Specifically, when both firms enter, competition stimulates innovation, whereas single entry leads to a lower innovation level. Third, when both innovation cost coefficient and entry costs are low or high, firms’ preferences align–either both enter or neither enters; at moderate cost levels, preferences diverge, and the optimal strategy is for neither firm to enter. Extensions with asymmetric innovation costs confirm the robustness of these results. These results provide theoretical guidance for strategic decision-making on market entry and innovation in competitive, technology-driven environments.

Co-author:Victor Shi

First Author:Siying Nie

Indexed by:SCI

Correspondence Author:Wei Geng

Document Code:131828

Discipline:Management Science

Document Type:J

Volume:317

Translation or Not:no

Included Journals:SCI

Links to published journals:https://www.sciencedirect.com/science/article/pii/S0957417426007414