Insights / Research BriefMay 17, 2024

Gaining Steam: Incumbent Lock-in and Entrant Leapfrogging

Richard Hornbeck, Shanon Hsuan-Ming Hsu, Anders Humlum, Martin Rotemberg
The adoption of new technologies can be slowed if companies become locked into alternatives that are cheaper at the outset. During the mid 1800s, small mills used waterpower because of its low fixed costs; their failure to switch to steam power slowed its adoption overall.
Based on BFI Working Paper No. 2024-54, “Gaining Steam: Incumbent Lock-in and Entrant Leapfrogging”