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Open Architecture And R&D Incentives

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  • Jae Nahm

Abstract

In open systems, firms give up their property rights to technologies and permit other companies to use these technologies. We ask how an incumbent's architecture choice affects social welfare by altering R&D competition among firms. More specifically, we ask whether an incumbent, by adopting an open system, can establish its socially inefficient technology as the market standard, while an entrant is developing a more efficient technology. It is shown that an incumbent has an incentive to preempt an entrant's competing technology by choosing an open system, but that the open system might result in a premature market standard.

Suggested Citation

  • Jae Nahm, 2004. "Open Architecture And R&D Incentives," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 547-568, December.
    • Handle: RePEc:bla:jindec:v:52:y:2004:i:4:p:547-568
    DOI: 10.1111/j.0022-1821.2004.00240.x
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    References listed on IDEAS

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    Cited by:

    1. Gauguier, Jean-Jacques, 2009. "L’industrialisation de l’Open Source," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/4388 edited by Toledano, Joëlle.
    2. Kevin Boudreau, 2010. "Open Platform Strategies and Innovation: Granting Access vs. Devolving Control," Management Science, INFORMS, vol. 56(10), pages 1849-1872, October.
    3. Peng Huang & Marco Ceccagnoli & Chris Forman & D. J. Wu, 2013. "Appropriability Mechanisms and the Platform Partnership Decision: Evidence from Enterprise Software," Management Science, INFORMS, vol. 59(1), pages 102-121, July.

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