Innovation, Openness, and Platform Control

By Geoffrey G. Parker, Marshall W. Van Alstyne. Management Sciences, 2018

443 citations recorded by the source corpus.

Suppose that a firm in charge of a business ecosystem is a firm in charge of a microeconomy. To achieve the highest growth rate, how open should that economy be? To encourage third-party developers, how long should their intellectual property interests last? We develop a sequential innovation model that addresses the trade-offs inherent in these two decisions: i Closing the platform increases the sponsor's ability to charge for access, while opening the platform increases developer ability to build upon it. ii The longer third-party developers retain rights to their innovations, the higher the royalties they and the sponsor earn, but the sooner those developers' rights expire, the sooner their innovations become a public good upon which other developers can build. Our model allows us to characterize the optimal levels of openness and of intellectual property IP duration in a platform ecosystem. We use standard Cobb-Douglas production technologies to derive our results. These findings can inform innovation strategy, choice of organizational form, IP noncompete decisions, and regulation policy. This paper was accepted by Chris Forman, information systems.

Subfields: Management of Technology and Innovation, Management Science and Operations Research, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/55dd10a40050b9e73594b37973bf692a17cf1b0c

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In Management of Technology and Innovation

In Management Science and Operations Research

In Strategy and Management

Citations in the corpus

Platform Ecosystems: How Developers Invert the Firm (2017, unknown): “We extend Parker and Van Alstyne (2017) by explicitly incorporating N d , the number of developers in an analytical framework, and analyzing developer-to-developer competition as well as platform-to-platform competition.”
Platform Competition: A Systematic and Interdisciplinary Review of the Literature (2020, unknown): “…their technology or forgoing enforcing their patents, if doing so speeds up the accumulation of installed base or the availability of complementary goods (Boudreau, 2010; Garud & Kumaraswamy, 1993; Karhu, Gustafsson, & Lyytinen, 2018; Parker & Van Alstyne, 2018; Schilling, 2011; West, 2003).”
Introduction - Platforms and Infrastructures in the Digital Age (2018, background): “Other platforms incentivize users to directly compete with developers (Gawer and Henderson 2007) or fold third-party innovation into the platform (Parker and Van Alstyne 2017) so that consumers obtain these functionalities at no additional cost.”