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Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel

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  • Annabelle Gawer
  • Rebecca Henderson

Abstract

This paper draws on a detailed history of Intel's strategy with respect to the complementary markets for microprocessors to explore the usefulness of the current theoretical literature for explaining behavior. We find that as the literature predicts, Intel invests heavily in these markets, both through direct entry and through subsidy. We also find, again consistent with the literature, that the firm's entry decisions are shaped by the belief that it does not have either the capabilities or the resources to enter all possible markets, and thus that it believes it is critical to encourage widespread entry. As several authors have pointed out, this imperative places the firm in a difficult strategic position, since it needs to attempt to commit to potential entrants that it will not engage in an ex-post "squeeze", despite the fact that ex post it has very strong incentives to do so. We find that the fact that the complementary markets in which Intel competes are complex, dynamic and multilayered considerably sharpens this dilemma. We explore the ways in which Intel attempts to solve it, highlighting in particular the organizational structure and processes through which they attempt to commit to making money in the markets which they choose to enter while also committing not to making too much. Our results have implications for both our understanding of the dynamics of competition in complements and of the role of organizational structures and processes in shaping competition.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11852.

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Date of creation: Dec 2005
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Publication status: published as Gawer, Annabelle and Rebecca Henderson. "Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel." Journal of Economics and Management Strategy 16, 1 (spring 2007): 1-34.
Handle: RePEc:nbr:nberwo:11852

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  2. Farrell, Joseph & Katz, Michael L, 2000. "Innovation, Rent Extraction, and Integration in Systems Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 413-32, December.
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Cited by:
  1. Andrea Mantovani & Francisco Ruiz-Aliseda, 2011. "Equilibrium Innovation Ecosystems: The Dark Side of Collaborating with Complementors," Working Papers 11-31, NET Institute.
  2. Tim COWEN & Annabelle GAWER, 2012. "Competition in the Cloud: Unleashing Investment and Innovation Within and Across Platforms," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(85), pages 45-62, 1st quart.
  3. Peng Huang & Marco Ceccagnoli & Chris Forman & D.J. Wu, 2009. "Participation in a Platform Ecosystem: Appropriability, Competition, and Access to the Installed Base," Working Papers 09-14, NET Institute, revised Sep 2009.
  4. Carolin Haeussler & Matthew J. Higgins, 2012. "Explaining Preferences for Control Rights in Strategic Alliances: A Property Rights and Capabilities Perspective Approach," NBER Working Papers 18364, National Bureau of Economic Research, Inc.
  5. Perrons, Robert K., 2009. "The open kimono: How Intel balances trust and power to maintain platform leadership," Research Policy, Elsevier, vol. 38(8), pages 1300-1312, October.
  6. Andras Niedermayer, 2007. "On Platforms, Incomplete Contracts, and Open Source Software," Diskussionsschriften dp0707, Universitaet Bern, Departement Volkswirtschaft.
  7. Arora, Ashish & Forman, Chris & Yoon, Ji Woong, 2010. "Complementarity and information technology adoption: Local area networks and the Internet," Information Economics and Policy, Elsevier, vol. 22(3), pages 228-242, July.
  8. Ding, Ke, 2013. "Platforms and firm capabilities : a study of emerging global value chains," IDE Discussion Papers 432, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  9. Ansari, Shahzad & Garud, Raghu, 2009. "Inter-generational transitions in socio-technical systems: The case of mobile communications," Research Policy, Elsevier, vol. 38(2), pages 382-392, March.
  10. Kevin J. Boudreau & Andrei Hagiu, 2008. "Platform Rules: Multi-Sided Platforms as Regulators," Harvard Business School Working Papers 09-061, Harvard Business School.
  11. Amel Attour & Maëlle Della Peruta, 2013. "Le rôle des connaissances architecturales dans l’élaboration de la plateforme technologique d’un écosystème en émergence: le cas des plateformes NFC," GREDEG Working Papers 2013-15, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  12. Leonhard Dobusch & Elke Schü�ler, 2013. "Theorizing path dependence: a review of positive feedback mechanisms in technology markets, regional clusters, and organizations," Industrial and Corporate Change, Oxford University Press, vol. 22(3), pages 617-647, June.
  13. Jason P. Davis & Yulia Muzyrya & Pai-Ling Yin, 2014. "Experimentation Strategies and Entrepreneurial Innovation: Inherited Market Differences in the iPhone Ecosystem," Discussion Papers 13-029, Stanford Institute for Economic Policy Research.
  14. Campbell-Kelly, Martin & Garcia-Swartz, Daniel D., 2009. "Pragmatism, not ideology: Historical perspectives on IBM's adoption of open-source software," Information Economics and Policy, Elsevier, vol. 21(3), pages 229-244, August.
  15. Niedermayer, Andras, 2013. "On platforms, incomplete contracts, and open source software," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 714-722.
  16. Timothy Simcoe, 2013. "Governing the Anticommons: Institutional Design for Standard-Setting Organizations," NBER Chapters, in: Innovation Policy and the Economy, Volume 14, pages 99-128 National Bureau of Economic Research, Inc.
  17. Koslowski, Thomas G. & Longstaff, Patricia H. & Vidal, Miguel & Grob, Thomas, 2012. "Resilience analysis of the ICT ecosystem," 23rd European Regional ITS Conference, Vienna 2012 60390, International Telecommunications Society (ITS).
  18. Martin Kenney & Bryan Pon, 2011. "Structuring the Smartphone Industry: Is the Mobile Internet OS Platform the Key?," Journal of Industry, Competition and Trade, Springer, vol. 11(3), pages 239-261, September.
  19. Timothy S. Simcoe & Stuart J.H. Graham & Maryann Feldman, 2007. "Competing on Standards? Entrepreneurship, Intellectual Property and the Platform Paradox," NBER Working Papers 13632, National Bureau of Economic Research, Inc.
  20. Pascal Le Masson & Benoît Weil & Armand Hatchuel & Patrick Cogez, 2012. "Why aren't they locked in waiting games? Unlocking rules and the ecology of concepts in the semiconductor industry," Post-Print hal-00870358, HAL.
  21. Alexy, Oliver & Reitzig, Markus, 2013. "Private–collective innovation, competition, and firms’ counterintuitive appropriation strategies," Research Policy, Elsevier, vol. 42(4), pages 895-913.
  22. Packalen, Mikko, 2010. "Complements and potential competition," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 244-253, May.
  23. Rahul Basole & Jürgen Karla, 2011. "On the Evolution of Mobile Platform Ecosystem Structure and Strategy," Business & Information Systems Engineering, Springer, vol. 3(5), pages 313-322, October.

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