“Ninety percent of new products fail within two years—so you shouldn’t be so eager to innovate.”
“Ninety percent of new products fail within two years—so you shouldn’t be so eager to innovate.” Do you agree? Why or why not? LO11.5
Within two years the market has rejected 90% of new products. However, 10% of the new products will be accepted. If the firm is included in that 10% then producing new products may be profitable for it. Then the firm can get the patents for that new product and can be a monopolist. It will increase the short-run profit of the firm. The expected profit can cover up the initial investment and the firm will be benefited. If the risk is involved then the firm will expect more additional profit for investment in development or innovation.
If the firm is included in 10% who succeed, it will be benefited. The firm will earn a short-run profit. It can get the patents of the new product and behave like a monopoly. Then initial investment can be covered up by the expected profit. If the risk is involved then the firm will expect more additional profit to invest for the innovations.
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