Benefiting from Innovation: Value Creation, Value Appropriation and the Role of Industry Architectures

Jacobides, Michael G.; Knudsen, Thorbjørn; Augier, Mie

doi:10.2139/ssrn.1309509

Cited by 122 publications

(191 citation statements)

References 48 publications

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“…Thus, while a modular architecture can increase interoperability of complements, by itself it does not make complements fungible across systems. So, while there is increasing fungibility (i.e., substitutability) between similar complements within a platform system, a focal complement might be more specialized to a focal platform system than others (Jacobides et al 2006(Jacobides et al , 2017. Accordingly, "there can be considerable heterogeneity among extensions [i.e., complements] in how closely they conform to a platform's prescribed interface specifications" (Tiwana 2015: 269).…”

Section: Sequential Vs Simultaneous Developmentmentioning

confidence: 99%

Platform Architecture and Quality Trade-offs of Multihoming Complements

Cennamo

Özalp

Kretschmer

2018

Information Systems Research

189

142

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Multihoming -the decision to design a complement to operate on multiple platforms -is becoming increasingly common in many platform markets. Perceived wisdom suggests that multihoming is beneficial for complement providers as they expand their market reach, but it reduces differentiation among competing platforms as the same complements become available on different platforms. We argue that complement providers face tradeoffs when designing their products for multiple platform architectures -they must decide how far to specialize the complement to each platform technological specifications. Because of these tradeoffs, multihoming complements can have different quality performance across platforms. In a study of the US video game industry, we find that multihoming games have lower quality performance on a technologically more complex console than on a less complex one. Also, games designed for and released on a focal platform have lower quality performance on platforms they are subsequently multihomed to. However, games that are released on the complex platform with a delay suffer a smaller drop in quality on complex platforms. This has important implications for platform competition, and for managers considering expanding their reach through multihoming. The logic is that multihoming offers potential additional revenues at limited costs for complementors, implicitly assuming that complements are the same on different platforms. But many platforms are not simple (two-sided) markets enabling transactions; they are also technology infrastructures whose features shape the development of third-party complementary products (Anderson et al. 2014;Gawer 2014, Tiwana et al.2010, Yoo et al. 2010. 2 Complements frequently must be tailored to a platform's core technological functions and interface specifications to take full advantage of its performance (Anderson et al. 2014, Claussen et al. 2015b, Tiwana 2015. In developing for multiple platforms, complementors must decide how far to specialize the complement to one platform (Schilling, 2000, Tiwana 2015, Yoo et al. 2010. We ask how the tradeoffs complementors face when designing products for multiple platforms affect the quality performance of multihoming complements across platforms. , Tiwana et al. 2010, Gawer 2014. As a system comprises the platform and its complements, the effect of platform architecture on both platform performance and complement supply matters for value creation at the system level (Cennamo 2016). the core technology components (e.g., processor cores), and the larger the number of specialized processors requiring a specific programming language for optimal utilization (i.e., no clean interface to handle the interdependencies), the more complex the platform. Complement developers must therefore choose to either use that language to optimally "conform" (Tiwana 2015) to the complex platform's specifications at the expense of integration and performance on other platforms, or to design the complement so it uses the lowest common denominator acr...

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Section: Sequential Vs Simultaneous Developmentmentioning

confidence: 99%

Platform Architecture and Quality Trade-offs of Multihoming Complements

Cennamo

Özalp

Kretschmer

2018

Information Systems Research

189

142

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“…To determine the structure of an industry is difficult because the relevance of surrogates often used to define industry boundaries -the functionality of a product, the components a product consist of, the relationships between components, or the processes required to develop, manufacture, and sell the product -can vary substantially across products, times, and regions (Dalziel 2005;Jacobides et al 2006). The probably only uncontestable way to describe an industry unambiguously would define an industry around a single product that consists of only one component, and every firm in this industry engages in all relevant processes.…”

Section: Industry Structurementioning

confidence: 99%

“…Early in an industry's life, the initial (engineering) design choices set the ground rules for which 'transfers' can become 'transactions' by making them standardized, countable, and evaluable (Baldwin and Clark 2006), and in consequence, cause the emergence of interaction patterns across an entire industry. Jacobides et al (2006) call the resulting industry structure the industry architecture. Once this industry structure has emerged, it represents substantial constraints for the industry participants, both for firm boundary location choices and product design choices.…”

Section: Introductionmentioning

confidence: 99%

The power of integrality: Linkages between product architecture, innovation, and industry structure

2008

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“…The computer industry had been dominated since the 1970s by national champions (ICL, Groupe Bull, Siemens-Nixdorf), which were vertically integrated computer firms each with their own captive hard disk drive operations. The introduction of the IBM PC architecture in the early 1980s shifted firm and industry structure from vertical integration to horizontal segmentation, and from regional supply chains to global ones (Dedrick and Kraemer, 1998;Jacobides et al, 2006). The basis for competition in disk drives shifted from supplying proprietary systems to supplying systems with (Chesbrough, 1999).…”

Section: Why France and Germany Did Not Benefit From Gmrmentioning

confidence: 99%

Who captures value from science-based innovation? The distribution of benefits from GMR in the hard disk drive industry

Dedrick

Kraemer

2015

Research Policy

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Hard disk drive industry a b s t r a c tWe analyze the discovery of giant magneto-resistance (GMR) and its development and commercialization by the global disk drive industry to answer the question of "Who captures the benefits from innovation in a global innovation system?" We assess the returns to the scientists, firms, and countries associated with GMR. We find that the French and German scientists that discovered GMR and their labs benefited by receiving the Nobel Prize and small licensing fees. The firm that first commercialized the technology, IBM, captured profits from selling hard disk drives and magnetic heads using GMR. Other hard disk drive and head manufacturers based in the U.S. and Japan were able to quickly assimilate the technology and catch up with IBM. France and Germany reaped limited returns due to the lack of domestic firms with the absorptive capacity to commercialize GMR. The U.S. and Japan benefited from the success of their firms in commercializing GMR, as did other countries which were part of the global value chains of those companies. Consumers and firms that incorporated hard drives in their products ultimately benefited from cheaper hard drives with greater capacity. These findings illustrate the importance of absorptive capacity at the firm and national level in capturing benefits from innovation. They also show that the benefits to first mover firms can be short-lived in a competitive industry with open transfer of knowledge and limited appropriability regimes. Finally, they show that the location of jobs and wages associated with innovative products depends on the structure of the global value chains of leading firms.

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Benefiting from Innovation: Value Creation, Value Appropriation and the Role of Industry Architectures

Cited by 122 publications

References 48 publications

Platform Architecture and Quality Trade-offs of Multihoming Complements

Platform Architecture and Quality Trade-offs of Multihoming Complements

The power of integrality: Linkages between product architecture, innovation, and industry structure

Who captures value from science-based innovation? The distribution of benefits from GMR in the hard disk drive industry

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