Strategic Intellectual Property Sharing: Competition on an Open Technology Platform Under Network Effects
Authors: Niculescu, Marius F.; Wu, D. J.; Xu, Lizhen
Journal: Information Systems Research (2018)
<jats:p>In this paper, we explore the strategic decision of an incumbent to open a proprietary technology platform to allow same-side co-opetition in a market characterized by network effects. We propose a game-theoretic model that analytically conceptualizes the interplay among the degree of same-side platform openness, the absorptive capacity of the entrant, and the intensity of network effects. Our analysis uncovers interesting new results. First, when entrant product quality is exogenous, under very strong network effects, the incumbent closes the technology. Moreover, we discuss various interesting open-platform co-opetition outcomes that arise under a fully covered market. When the entrant chooses the quality level and the incumbent is strategic in its platform opening decision, we find that intense network effects make new players shun the market, so intellectual property (IP) sharing is not possible in equilibrium. When the network effects are of intermediate intensity, the incumbent opens the technology to the entrants who have a sufficiently high absorptive capacity, calibrating the amount of sharing to the entrant’s absorptive capacity level to ensure that the duopoly s…