Paid or Free? The Manufacturer's Revenue Strategy in Response to the Developer's Entry in Technology Platform Market

Zha, Yong; Liu, Haonan; Li, Quan; Wu, Xiangxiang

doi:10.1109/tem.2022.3228805

Cited by 3 publications

(5 citation statements)

References 56 publications

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“…Amazon Alex) developed by the IoT platform company (Priego and Jonathan, 2023;Yoonseock et al, 2023). To capture the notion of strict complementarity, according to previous studies (Lee et al, 2020;Zha et al, 2024;Chung et al, 2023), the overall quality of the smart goods Q i is modeled as a multiplication of the IoT platform software service m and hardware quality q i , i ∈ fA; B; I g, that is, Q i ¼ mq i , i ∈ fA; B; I g. More specifically, the software technical services provided by the IoT platform and the intelligent hardware developed by smart device manufacturers collectively constitute the smart device. The above model capturing the complementarity between smart hardware devices and IoT platforms has been applied in many information system research and complementary goods research (e.g.…”

Section: Firmsmentioning

confidence: 99%

“…q I ¼ 1) and set q A ¼ 1 þ α and q B ¼ 1 þ 2α, where α ≥ 0 represents the quality differentials between the firms' smart devices. In other words, we assume that the platform has the lowest perceived hardware quality (Huang et al, 2022;Zha et al, 2024;Chung et al, 2023). Notice that, our assumption that the platform hardware quality of smart devices has the lowest perceived quality is based on the notion that the quality of the platform's hardware device is lower than established manufacturers' (Zha et al, 2023).…”

Section: Firmsmentioning

confidence: 99%

“…As for the IoT platform, it determines his IoT technology level m by incurring the cost C(m)=km2 where k is the technical level (Huang et al ., 2018; Chung et al ., 2023). We denote the service model using the continuous variable that represents IoT services or skills offered by the platform (Amazon, 2020; Zha et al. , 2024).…”

Section: The Modelmentioning

confidence: 99%

“…Amazon Alex) developed by the IoT platform company (Priego and Jonathan, 2023; Yoonseock et al ., 2023). To capture the notion of strict complementarity, according to previous studies (Lee et al ., 2020; Zha et al. , 2024; Chung et al ., 2023), the overall quality of the smart goods Qi is modeled as a multiplication of the IoT platform software service m and hardware quality qi, i∈{A,B,I}, that is, Qi=mqi, i∈{A,B,I}.…”

Section: The Modelmentioning

confidence: 99%

“…In other words, we assume that the platform has the lowest perceived hardware quality (Huang et al. , 2022; Zha et al. , 2024; Chung et al ., 2023).…”

Section: The Modelmentioning

confidence: 99%

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Should the Internet of Things platform enter the smart device market?

Li,

Ma,

Zhang

2024

IMDS

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PurposeThe Internet of Things (IoT) platform empowers the digital transformation of the manufacturing industry by providing information technology services. Simultaneously, it enters the market by offering smart products to consumers. In light of different service fee scenarios, this article explores the optimal decision-making for the platform. It investigates the pricing models and entry decisions of IoT platforms.Design/methodology/approachIn this study, we have formulated a game-theoretic model to scrutinize the influence of the IoT platform ventured into the smart device market on the pre-existing suppliers operating under subscription-based and usage-based pricing agreements.FindingsOur outcome shows that introducing an IoT platform’s smart device has a differential effect on manufacturers depending on their contract type. Notably, our research indicates that introducing the platform’s own smart device within the subscription-based model does not negatively impact the profitability of incumbent manufacturers, so long as there is a noticeable discrepancy in the quality of the smart devices. However, our findings within the usage-based model demonstrate that despite the variance in smart device quality differentiation, the platform’s resolution to launch their device and impose their pricing agreements adversely affects established manufacturers. Additionally, we obtain valuable Intel regarding the platform’s entry strategies and contractual inclinations. We demonstrate that the platform is incentivized to present its smart device when reasonable entry costs remain. Furthermore, the platform prefers subscription-based contracts when the subscription fee is relatively high in non-platform entry and entry cases.Originality/valueThese findings hold significant practical implications for firms operating in an IoT-based supply chain.

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Section: Firmsmentioning

confidence: 99%

Section: Firmsmentioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

“…In other words, we assume that the platform has the lowest perceived hardware quality (Huang et al. , 2022; Zha et al. , 2024; Chung et al ., 2023).…”

Section: The Modelmentioning

confidence: 99%

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