Open Platform Strategies and Innovation: Granting Access vs. Devolving Control

Abstract

This paper studies two fundamentally distinct approaches to opening a technology platform and their different impacts on innovation. One approach is to grant access to a platform and thereby open up markets for complementary components around the platform. Another approach is to give up control over the platform itself. Using data on 21 handheld computing systems (1990-2004), I find that granting greater levels of access to independent hardware developer firms produces up to a fivefold acceleration in the rate of new handheld device development, depending on the precise degree of access and how this policy was implemented. Where operating system platform owners went further to give up control (beyond just granting access to their platforms) the incremental effect on new device development was still positive but an order of magnitude smaller. The evidence from the industry and theoretical arguments both suggest that distinct economic mechanisms were set in motion by these two approaches to opening.technical change, systems, open strategies, platforms, complementors, distributed innovation, information technology

Innovation, Openness, and Platform Control

“…Boudreau (2010) defines platforms as the components used in common across a product family. Platform functionality can be extended by third parties and are subject to network effects (Eisenmann et al 2011;Evans et al 2006;Van Alstyne 2000a, b, 2005).…”

“…Another factor distinguishing open from closed systems is the choice of governance model (Laffan 2011), which we conceive of as the ability to bundle developer innovation (described below) and the decision whether to vertically integrate. Choosing the optimal level of openness is critical for firms that create and maintain platforms (Boudreau 2010, Chesbrough 2003, Eisenmann et al 2009, Gawer and Cusumano 2002, Gawer and Henderson 2007, West 2003. This decision entails a trade-off between growth and appropriation (West 2003).…”

A Comparison of Inter-Organizational Business Models of Mobile App Stores: There is more than Open vs. Closed

“…A platform is a set of stable elements (e.g., physical components, operating-system software, standards) that allow the development of interchangeable, complementary components [5], [20]. Examples of platforms are VHS, Microsoft Windows, Facebook, and the Apple iPhone.…”

“…Microsoft Windows was successful because it had the largest number of applications available compared to other operating systems. Boudreau [5] analyzed the effect of three different platform strategies: a) having a closed platform, b) opening the platform for complementary services, and c) giving up the control of the platform. He analyzed the effect of these platform strategies for 21 handheld computing systems on new device development between 1990 and 2004.…”

Applying Enterprise Architecture to Business Networks

“…Organizations expand their boundaries to use external expertise [Boudreau, 2010, Chesbrough, 2006. Instead of engaging a set of known business partners, organizations can innovative through the concept of "crowdsourcing", which is a human computation platform providing access to a large crowd.…”