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Concentration in Internet Access and Entrepreneurial Truncation of Innovation

Listed author(s):
  • Greenstein Shane

    (Kellogg School of Management, Northwestern University)

With a concentrated supply of broadband Internet access, will the future of the Internet be as innovative as the past? This essay reconsiders contemporary debates that view broadband providers as gatekeepers. Instead, it offers an alternative perspective, viewing carriers as platform leaders. That framework focuses attention on the importance of platforms for innovation, and highlights issues missed in contemporary debates. The essay stresses the differences between open and proprietary systems, and between systems with overlapping but competing leadership. Viewed through this lens, platform leadership leads to lower transactions for affiliated partners, but a narrowing of the range of innovation by young firms in comparison to an open and unrestricted structure, a process labeled as “entrepreneurial truncation.” Platform leaders with market power also provide uneven degrees of transparency, use more discriminatory practices, and put unaffiliated business partners at disadvantages, which can deter entrepreneurial innovation as well. The essay concludes that innovation arises in all systems, so the exaggerated claims of contemporary debate lack merit. However, contemporary debate also misses the key point addressed by this essay: that open platforms are superior at addressing a wider and unexpected set of exploratory activities, and that policy can, and should, play an important role in fostering openness.

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File URL: https://www.degruyter.com/view/j/cas.2012.7.issue-1/1932-0213.1092/1932-0213.1092.xml?format=INT
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Article provided by De Gruyter in its journal Capitalism and Society.

Volume (Year): 7 (2012)
Issue (Month): 1 (November)
Pages: 1-33

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Handle: RePEc:bpj:capsoc:v:7:y:2012:i:1:p:1-33:n:1
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  1. Peyman FARATIN & David CLARK & Steven BAUER & William LEHR & Patrick GILMORE & Arthur BERGER, 2008. "The Growing Complexity of Internet Interconnection," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(72), pages 51-72, 4th quart.
  2. Benjamin E. Hermalin & Michael L. Katz, 2011. "Customer or Complementor? Intercarrier Compensation with Two‐Sided Benefits," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 379-408, 06.
  3. Rosston Gregory L. & Savage Scott J & Waldman Donald M, 2010. "Household Demand for Broadband Internet in 2010," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-45, September.
  4. Gregory Rosston & Scott Savage & Donald Waldman, 2010. "Household Demand for Broadband Internet Service," Discussion Papers 09-008, Stanford Institute for Economic Policy Research, revised Feb 2010.
  5. David S. Evans & Andrei Hagiu & Richard Schmalensee, 2008. "Invisible Engines: How Software Platforms Drive Innovation and Transform Industries," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550687, July.
  6. Hermalin, Benjamin E. & Katz, Michael L., 2007. "The economics of product-line restrictions with an application to the network neutrality debate," Information Economics and Policy, Elsevier, vol. 19(2), pages 215-248, June.
  7. Annabelle Gawer, 2009. "Platforms, Markets and Innovation: An Introduction," Chapters,in: Platforms, Markets and Innovation, chapter 1 Edward Elgar Publishing.
  8. Christiaan Hogendorn, 2012. "Spillovers and Network Neutrality," Chapters,in: Regulation and the Performance of Communication and Information Networks, chapter 8 Edward Elgar Publishing.
  9. Nicholas Economides, 2010. "Why Imposing New Tolls on Third-Party Content and Applications Threatens Innovation and Will Not Improve Broadband Providers’ Investment," Working Papers 10-01, NET Institute, revised Jan 2010.
  10. Annabelle Gawer & Rebecca Henderson, 2007. "Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 1-34, 03.
  11. Hogendorn Christiaan, 2005. "Regulating Vertical Integration in Broadband: Open Access versus Common Carriage," Review of Network Economics, De Gruyter, vol. 4(1), pages 1-14, March.
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