IDEAS home Printed from https://ideas.repec.org/a/ids/ijmnec/v1y2008i1p44-57.html
   My bibliography  Save this article

Coordination mechanisms in the development of complementary technologies

Author

Listed:
  • Lucia Silva Gao
  • Lihui Lin
  • Nalin Kulatilaka

Abstract

It is often the case that the introduction of new products and services requires the development of several distinct complementary technologies. These technologies may be independently developed by different firms. Each firm may possess a technology that has a much greater value when combined with those of the other firms to form a complementary system. The success of such a system hinges to a large extent on the ability of the firms to coordinate their innovation activities. In this paper, we build a simple model to illustrate the incentive coordination issue. We show that independent firms make less effort than an integrated firm. We use case examples to discuss how Mergers and Acquisitions (M&A), equity investments and cross-licensing serve as mechanisms to align incentives. M&A yield optimum effort levels and are often observed. Cross-equity investments tend to encourage greater effort than independent firms. Cross-licensing can be used to alleviate legal concerns when firms develop patentable complementary technologies.

Suggested Citation

  • Lucia Silva Gao & Lihui Lin & Nalin Kulatilaka, 2008. "Coordination mechanisms in the development of complementary technologies," International Journal of Management and Network Economics, Inderscience Enterprises Ltd, vol. 1(1), pages 44-57.
  • Handle: RePEc:ids:ijmnec:v:1:y:2008:i:1:p:44-57
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=18679
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Schoder, Detlef, 2000. "Forecasting the success of telecommunication services in the presence of network effects," Information Economics and Policy, Elsevier, vol. 12(2), pages 181-200, June.
    2. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    3. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    4. Shy,Oz, 2001. "The Economics of Network Industries," Cambridge Books, Cambridge University Press, number 9780521805001, November.
    5. Robert E. Litan & Alice M. Rivlin, 2001. "Projecting the Economic Impact of the Internet," American Economic Review, American Economic Association, pages 313-317.
    6. Economides, Nicholas & White, Lawrence J., 1994. "Networks and compatibility: Implications for antitrust," European Economic Review, Elsevier, vol. 38(3-4), pages 651-662, April.
    7. Cooper, Russel J & Madan, Dilip B & McLaren, Keith R, 1995. "Approaches to the Solution of Stochastic Intertemporal Consumption Models," Australian Economic Papers, Wiley Blackwell, vol. 34(64), pages 86-103, June.
    8. Gandal, Neil, 1995. "Competing Compatibility Standards and Network Externalities in the PC Software Market," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 599-608, November.
    9. Bensaid, Bernard & Lesne, Jean-Philippe, 1996. "Dynamic monopoly pricing with network externalities," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 837-855, October.
    10. Martin D. D. Evans, 1998. "Dividend Variability and Stock Market Swings," Review of Economic Studies, Oxford University Press, pages 711-740.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijmnec:v:1:y:2008:i:1:p:44-57. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Darren Simpson). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID==259 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.