The market evolution and sales takeoff of product innovations

Rajshree Agarwal, Barry L. Bayus

Research output: Contribution to journalArticlepeer-review


In contrast to the prevailing supply-side explanation that price decreases are the key driver of a sales takeoff, we argue that outward shifting supply and demand curves lead to market takeoff. Our fundamental idea is that sales in new markets are initially low because the first commercialized forms of new innovations are primitive. Then, as new firms enter, actual and perceived product quality improves (and prices possibly drop), which leads to a takeoff in sales. To provide empirical evidence for this explanation, we explore the relationship between takeoff times, price decreases, and firm entry for a sample of consumer and industrial product innovations commercialized in the United States over the past 150 years. Based on a proportional hazards analysis of takeoff times, we find that new firm entry dominates other factors in explaining observed sales takeoff times. We interpret these results as supporting the idea that demand shifts during the early evolution of a new market due to nonprice factors is the key driver of a sales takeoff.

Original languageEnglish (US)
Pages (from-to)1024-1041
Number of pages18
JournalManagement Science
Issue number8
StatePublished - Aug 2002


  • Entrepreneurship
  • Firm entry
  • New product development

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research


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