Boudreau (2010) Open Platform Strategies and Innovation: Granting Access vs. Devolving Control

Question 1

What are the two approaches to opening a technology platform and their different impacts on innovation?

Answer 1

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.

I consider two broad and fundamentally different approaches to opening: granting outsiders access to the platform, thereby opening up markets for complementary innovation around the platform, and giving up some control over the plat-
form itself.

Question 2

What was the main finding from this paper about the different types approaches?

Answer 2

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 plat-
forms) the incremental effect on new device development was still positive but an order of magnitude smaller.

Question 3

What are open and closed systems?

Answer 3

openness relates to the easing of restrictions on the use, development, and commercialization of a technology.

the owner of a closed technology fully restricts outsiders from the technology through patents and copyrights, secrecy,
or other means

a purely open technology is placed in the public domain, neither owned nor controlled by any party, thus accessible to all

Question 4

What is the key trade-off for firms when it considers to open its technology?

Answer 4

A firm considering whether to open its technology faces a trade-off that has come to be known as “adoption versus appropriability” (West 2003). Pursuing an open strategy reduces the innovator’s share of profits by lowering entry barriers and introducing intrasystem competition. On the other hand, all else being equal, opening might encourage wider adoption of the system by reducing consumers’ fears of being
locked into a single vendor

Question 5

What is the diversity and control trade-off?

Answer 5

diversity versus control.” On the diversity side, an open system may benefit from the input, ideas, and knowledge of a broader pool of contributors. Indeed, drawing on external knowledge has been one of the more persuasive arguments for opening innovation

However, external knowledge must also be actively applied, requiring deliberate effort and investment. For this reason, opening may pose a problem in situations where diffuse property rights reduce all parties’ incentives to invest and sponsor innovation in the system
advantages of closed, vertically integrated systems when innovation requires cross-
component coordination or knowledge sharing

Question 6

What are the conclusions of the paper?

Answer 6

In terms of granting access, I found an inverted-U relationship between innovation rates and platform owners’ liberalness in licensing complementary hardware developers. Sharing IP with complementors in the form of reference designs had a much smaller positive effect. In relation to platform control (giving up equity control, narrowing vertical scope, or allowing direct contributions to the platform), the overall effect of opening was small and positive. In the preferred model, granting access to complementors accelerated the introduction of new devices by a factor of roughly five; giving up control over the platform increased the
innovation rate by roughly 20%.