Benefits (especially for new entrant firms)
1) Avoids head to head competition with well established players in the market. Can be significant for new entrants that don't possess resources on the scale of their more established counterparts.
2) Offers opportunity to prove a new technology or a new application for a technology. Gives chance to demonstrate tech, where customers can see it in action and make judgement of value.
3) Scope for learning new technology and thereby enhancing it. Via successful incremental innovations the tech can be improved and firms start to move up the s-curve. Market niches provides chance to learn tech in a more protected environment.