IDEAS home Printed from https://ideas.repec.org/a/spr/jknowl/v16y2025i1d10.1007_s13132-024-01957-2.html
   My bibliography  Save this article

How a Leader Firm Responds to Competition: Protecting Digital Assets Amidst Imitation, Substitution, and Entry Threats

Author

Listed:
  • Hongyu Wu

    (Business College, Qingdao University)

  • Thompson S. H. Teo

    (School of Business, National University of Singapore)

  • Dapeng Pan

    (Research Center of Cyber Science and Technology, Hangzhou Innovation Institute)

  • Bo Zou

    (School of Business, Sun Yat-Sen University)

Abstract

Existing research on protecting digital assets has primarily focused on reducing the threat of imitation threat via formal strategies (such as patents, copyrights, and trademarks) and substitution threat via informal strategies (such as rapid innovation, encouraging imitation). However, due to the ease of copying digital product features, it remains unclear how a leader firm can balance the tension between imitation and substitution threats for protecting its digital assets, notably under open and highly uncertain conditions. To address this issue, we have developed a two-stage evolutionary game model that describes the strategic positioning of a leader firm and its subsequent adjustments in response to different competitive scenarios. Our results indicate that a weak incumbent tends to adopt the imitation innovation strategy, while the potential entrant tends to align itself with the weak incumbent. The leader’s strategic positioning is affected by both independent and interactive effects of the weak incumbent and potential entrant. Our research verifies the significant role of the potential entrant in helping the leader firm to protect its digital assets through the implementation of formal and informal strategies. Furthermore, we extend the application of the resource-based view (RBV) in high uncertainty markets by combining it with strategic positioning. Our research provides managers with a better understanding of competitive scenarios and enables them to make appropriate responses to protect their digital assets.

Suggested Citation

  • Hongyu Wu & Thompson S. H. Teo & Dapeng Pan & Bo Zou, 2025. "How a Leader Firm Responds to Competition: Protecting Digital Assets Amidst Imitation, Substitution, and Entry Threats," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 1396-1436, March.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:1:d:10.1007_s13132-024-01957-2
    DOI: 10.1007/s13132-024-01957-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13132-024-01957-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s13132-024-01957-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    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. George J. Mailath, 1998. "Corrigenda [Do People Play Nash Equilibrium? Lessons from Evolutionary Game Theory]," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1941-1941, December.
    2. Milan Miric & Lars Bo Jeppesen, 2020. "Does piracy lead to product abandonment or stimulate new product development?: Evidence from mobile platform‐based developer firms," Strategic Management Journal, Wiley Blackwell, vol. 41(12), pages 2155-2184, December.
    3. Richard Makadok & David Gaddis Ross, 2018. "Losing by winning: The danger zone of adverse competitor replacement," Strategic Management Journal, Wiley Blackwell, vol. 39(7), pages 1990-2013, July.
    4. Dawei Liu, 2011. "Imitation or innovation to enhance the performance: an empirical investigation of 258 Chinese firms," International Journal of Business Performance Management, Inderscience Enterprises Ltd, vol. 12(4), pages 377-395.
    5. Lee, Keun & Malerba, Franco, 2017. "Catch-up cycles and changes in industrial leadership:Windows of opportunity and responses of firms and countries in the evolution of sectoral systems," Research Policy, Elsevier, vol. 46(2), pages 338-351.
    6. Kang, Hyo & Song, Jaeyong, 2017. "Innovation and recurring shifts in industrial leadership: Three phases of change and persistence in the camera industry," Research Policy, Elsevier, vol. 46(2), pages 376-387.
    7. Cédric Gossart & Altay Özaygen & Müge Özman, 2020. "Are Litigated Patents More Valuable? The Case of LEDs," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(3), pages 825-844, September.
    8. Miric, Milan & Boudreau, Kevin J. & Jeppesen, Lars Bo, 2019. "Protecting their digital assets: The use of formal & informal appropriability strategies by App developers," Research Policy, Elsevier, vol. 48(8), pages 1-1.
    9. Arun Sundararajan, 2004. "Managing Digital Piracy: Pricing and Protection," Information Systems Research, INFORMS, vol. 15(3), pages 287-308, September.
    10. Cédric Gossart & Altay Özaygen & Müge Özman, 2020. "Are Litigated Patents More Valuable? The Case of LEDs," Post-Print hal-03825276, HAL.
    11. Laslier, Jean-Francois & Topol, Richard & Walliser, Bernard, 2001. "A Behavioral Learning Process in Games," Games and Economic Behavior, Elsevier, vol. 37(2), pages 340-366, November.
    12. Kerstin J. Schaefer, 2020. "Catching up by hiring: The case of Huawei," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(9), pages 1500-1515, December.
    13. Xiao-Shan Yap & Rajah Rasiah, 2017. "Catching up and leapfrogging in a high-tech manufacturing industry: towards a firm-level taxonomy of knowledge accumulation," Knowledge Management Research & Practice, Taylor & Francis Journals, vol. 15(1), pages 114-129, February.
    14. Avi Goldfarb & Shane M. Greenstein & Catherine E. Tucker, 2015. "Introduction to "Economic Analysis of the Digital Economy"," NBER Chapters, in: Economic Analysis of the Digital Economy, pages 1-17, National Bureau of Economic Research, Inc.
    15. Mary J. Benner & Mary Tripsas, 2012. "The influence of prior industry affiliation on framing in nascent industries: the evolution of digital cameras," Strategic Management Journal, Wiley Blackwell, vol. 33(3), pages 277-302, March.
    16. Hart E. Posen & Dirk Martignoni, 2018. "Revisiting the imitation assumption: Why imitation may increase, rather than decrease, performance heterogeneity," Strategic Management Journal, Wiley Blackwell, vol. 39(5), pages 1350-1369, May.
    17. Peitz, Martin & Waelbroeck, Patrick, 2006. "Piracy of digital products: A critical review of the theoretical literature," Information Economics and Policy, Elsevier, vol. 18(4), pages 449-476, November.
    18. Erdem Dogukan Yilmaz & Ivana Naumovska & Milan Miric, 2023. "Does imitation increase or decrease demand for an original product? Understanding the opposing effects of discovery and substitution," Strategic Management Journal, Wiley Blackwell, vol. 44(3), pages 639-671, March.
    19. Giachetti, Claudio & Marchi, Gianluca, 2017. "Successive changes in leadership in the worldwide mobile phone industry: The role of windows of opportunity and firms’ competitive action," Research Policy, Elsevier, vol. 46(2), pages 352-364.
    20. Sendil Ethiraj & Yue Maggie Zhou, 2019. "Fight or flight? Market positions, submarket interdependencies, and strategic responses to entry threats," Strategic Management Journal, Wiley Blackwell, vol. 40(10), pages 1545-1569, October.
    21. Kevin J. Boudreau & Lars Bo Jeppesen & Milan Miric, 2022. "Competing on freemium: Digital competition with network effects," Strategic Management Journal, Wiley Blackwell, vol. 43(7), pages 1374-1401, July.
    22. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    23. George J. Mailath, 1998. "Do People Play Nash Equilibrium? Lessons from Evolutionary Game Theory," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1347-1374, September.
    24. Umit Ozmel & Jeffrey J. Reuer & Cheng-Wei Wu, 2017. "Interorganizational Imitation and Acquisitions of High-tech Ventures," Strategic Management Journal, Wiley Blackwell, vol. 38(13), pages 2647-2665, December.
    25. Tunay I. Tunca & Qiong Wu, 2013. "Fighting Fire with Fire: Commercial Piracy and the Role of File Sharing on Copyright Protection Policy for Digital Goods," Information Systems Research, INFORMS, vol. 24(2), pages 436-453, June.
    26. Cédric Gossart & Altay Seref Ozaygen & Müge Özman Gossart, 2020. "Are litigated patents more valuable ? The case of LEDs," Post-Print hal-02331646, HAL.
    27. Oliver Alexy & Joel West & Helge Klapper & Markus Reitzig, 2018. "Surrendering control to gain advantage: Reconciling openness and the resource‐based view of the firm," Strategic Management Journal, Wiley Blackwell, vol. 39(6), pages 1704-1727, June.
    28. Wen Wen & Feng Zhu, 2019. "Threat of platform‐owner entry and complementor responses: Evidence from the mobile app market," Strategic Management Journal, Wiley Blackwell, vol. 40(9), pages 1336-1367, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Milan Miric & Lars Bo Jeppesen, 2020. "Does piracy lead to product abandonment or stimulate new product development?: Evidence from mobile platform‐based developer firms," Strategic Management Journal, Wiley Blackwell, vol. 41(12), pages 2155-2184, December.
    2. Davy, Elder & Hansen, Ulrich E., 2023. "A firm-level perspective on windows of opportunity," Technology in Society, Elsevier, vol. 75(C).
    3. Yuzhe Miao & Jaeyong Song & Keun Lee & Chuyue Jin, 2018. "Technological catch-up by east Asian firms: Trends, issues, and future research agenda," Asia Pacific Journal of Management, Springer, vol. 35(3), pages 639-669, September.
    4. Xiaoyang Zhao & Jie Mi, 2024. "Firms’ corporate social irresponsibility behaviors during interplay with consumers in evolutionary game models," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-9, December.
    5. Li, Daitian & Malerba, Franco, 2024. "Technological change and the evolution of the links across sectoral systems: The case of mobile communications," Technovation, Elsevier, vol. 130(C).
    6. Cenamor, Javier & Frishammar, Johan, 2021. "Openness in platform ecosystems: Innovation strategies for complementary products," Research Policy, Elsevier, vol. 50(1).
    7. Bradley, Wendy A. & Kolev, Julian, 2023. "How does digital piracy affect innovation? Evidence from software firms," Research Policy, Elsevier, vol. 52(3).
    8. Christian Peukert & Margaritha Windisch, 2023. "The Economics of Copyright in the Digital Age," CESifo Working Paper Series 10687, CESifo.
    9. Lu Xu & Jie Xiong & Jie Yan & Richard Soparnot & Zhe Yuan, 2023. "Technological Uncertainty and Catch-Up Patterns: Insights of Four Chinese Manufacturing Sectors," Post-Print hal-04011634, HAL.
    10. Erdem Dogukan Yilmaz & Ivana Naumovska & Milan Miric, 2023. "Does imitation increase or decrease demand for an original product? Understanding the opposing effects of discovery and substitution," Strategic Management Journal, Wiley Blackwell, vol. 44(3), pages 639-671, March.
    11. Miric, Milan & Jeppesen, Lars Bo, 2023. "How does competition influence innovative effort within a platform-based ecosystem? Contrasting paid and unpaid contributors," Research Policy, Elsevier, vol. 52(7).
    12. Wu, Aiqi & Song, Di & Liu, Yihui, 2022. "Platform synergy and innovation speed of SMEs: The roles of organizational design and regional environment," Journal of Business Research, Elsevier, vol. 149(C), pages 38-53.
    13. Luis Aguiar & Jörg Claussen & Christian Peukert, 2018. "Catch Me If You Can: Effectiveness and Consequences of Online Copyright Enforcement," Information Systems Research, INFORMS, vol. 29(3), pages 656-678, September.
    14. Cenamor, Javier, 2021. "Complementor competitive advantage: A framework for strategic decisions," Journal of Business Research, Elsevier, vol. 122(C), pages 335-343.
    15. Kwak, Kiho & Kim, Namil, 2022. "Industrial Leadership Changes without Technological Discontinuity: Modularization, Institution-Led Market Discontinuity, and Market Development Strategy," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    16. Peili Yu & Junguo Shi & Bert M. Sadowski & Önder Nomaler, 2020. "Catching Up in the Face of Technological Discontinuity: Exploring the Role of Demand Structure and Technological Regimes in the Transition from 2G to 3G in China," Journal of Evolutionary Economics, Springer, vol. 30(3), pages 815-841, July.
    17. Grazia Sveva Ascione & Laura Ciucci & Claudio Detotto & Valerio Sterzi, 2022. "Universities involvement in patent litigation: an analysis of the characteristics of US litigated patents," Scientometrics, Springer;Akadémiai Kiadó, vol. 127(12), pages 6855-6879, December.
    18. Han, Nianchen & Zhang, Yuchen & Tong, Tony W., 2024. "Appropriability risk and knowledge search on digital platforms," Research Policy, Elsevier, vol. 53(7).
    19. Philipp N. Baecker, 2007. "Real Options and Intellectual Property," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-540-48264-2, December.
    20. Giachetti, Claudio & Mensah, Deborah Tiniwah, 2023. "Catching-up during technological windows of opportunity: An industry product categories perspective," Research Policy, Elsevier, vol. 52(2).

    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:spr:jknowl:v:16:y:2025:i:1:d:10.1007_s13132-024-01957-2. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.