Time-cost substitutability, earlycutting threat, and innovation timing

- We introduce a time-cost substitutable quality development function.
- With higher experimental intensity, an imitator could earlycut the innovator.
- Earlycutting threat reduces new product's quality but advances its launching date.
- Mild earlycutting threat might be socially preferable.

With time-cost substitutability, a potential imitator could threat to “earlycut” the innovator by increasing experimental intensity. The earlycutting threat or uncertainty about the potential imitator's experimental cost advantage usually drives down the new product's quality but advances its launching date.