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Economic Value Creation in Mobile Applications

Author

Listed:
  • Timothy Bresnahan

    (Stanford University)

  • Jason Davis

    (University of Wisconsin Stevens Point)

  • Pai-Ling Yin

    (Stanford Institute for Economic Policy Research)

Abstract

New mobile development platforms are a 21st-century growth pole. By successfully recombining existing information technologies with new innovations, they have spurred a positive feedback loop of consumer adoption of mobile devices and firm entry into a wide variety of applications, or “apps.†Describing the industry calls for superlatives: after just a few years, it has the largest installed base of programmable devices in the history of computing and the largest group of app developers, mostly entrepreneurs, ever to enter a technology industry. Despite this size, the industry is still at an early stage, with rapid growth and a wide variety of economic experiments trying to resolve the uncertainty about how this new industry will create economic value. Because there are hundreds, and may someday be thousands, of app markets, the industry needs economic institutions to support market experimentation. However, as we document in this paper, the sheer volume and market diversity of app product entry has created problems for marketing and commercialization, most importantly the challenges of matching consumers to products. At this early stage in the industry life cycle, the existing market institutions have been overwhelmed. This early pattern is like many earlier information and communications technology industries in that the early stage shows a pattern of technical success but commercialization struggles. However, several important new issues arise, including a (possibly transitory) bias against entrepreneurial commercialization, and the importance of end-user demand in determining market evolution. We conclude by considering how this situation has impacted the industry’s task of discovering economic value and choosing among different app and platform features to make its ultimate contribution to economic growth. We also consider the likely market and institutional responses to the current bottleneck.

Suggested Citation

  • Timothy Bresnahan & Jason Davis & Pai-Ling Yin, 2013. "Economic Value Creation in Mobile Applications," Discussion Papers 13-007, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:13-007
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    References listed on IDEAS

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    3. Nikhil P. Varaiya, 2017. "Michel Kripalani and Oceanhouse Media: Journey of a Serial Entrepreneur," Entrepreneurship Theory and Practice, , vol. 41(4), pages 641-659, July.
    4. Ekaterina Prytkova, 2021. "ICT's Wide Web: a System-Level Analysis of ICT's Industrial Diffusion with Algorithmic Links," Jena Economics Research Papers 2021-005, Friedrich-Schiller-University Jena.
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    6. Garcia-Swartz, Daniel D. & Garcia-Vicente, Florencia, 2015. "Network effects on the iPhone platform: An empirical examination," Telecommunications Policy, Elsevier, vol. 39(10), pages 877-895.
    7. Kevin J. Boudreau, 2018. "Amateurs Crowds & Professional Entrepreneurs as Platform Complementors," NBER Working Papers 24512, National Bureau of Economic Research, Inc.

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