Keystone Players and Complementors: An Innovation Perspective

In this article, we investigate the role of keystone players and consider their impact in terms of innovation rate in an industry. To do so, we build a theoretical framework that considers the innovation rate in the context of an industry with one keystone player and then with multiple keystone players. The results are threefold. First, the presence of a keystone player is incredibly important for innovation on a market. Second, however, our results also show that a biased market power in favor of the keystone player may hinder innovation in this industry, although the negative impact on the industry’s innovation rate may not be seen at first. Finally, we demonstrate that an industry obtains a higher innovation rate with multiple keystone players. This framework could inform decisions for the antitrust enforcers.