Marco Ceccagnoli

Cocreation of value in a platform ecosystem: the case of enterprise software

It has been argued that platform technology owners cocreate business value with other firms in their platform ecosystems by encouraging complementary invention and exploiting indirect network effects. In this study, we examine whether participation in an ecosystem partnership improves the business performance of small independent software vendors (ISVs) in the enterprise software industry and how appropriability mechanisms influence the benefits of partnership. By analyzing the partnering activities and performance indicators of a sample of 1,210 small ISVs over the period 1996-2004, we find that joining a major platform owners platform ecosystem is associated with an increase in sales and a greater likelihood of issuing an initial public offering (IPO). In addition, we show that these impacts are greater when ISVs have greater intellectual property rights or stronger downstream capabilities. This research highlights the value of interoperability between software products, and stresses that value cocreation and appropriation are not mutually exclusive strategies in interfirm collaboration.

Appropriability Mechanisms and the Platform Partnership Decision: Evidence from Enterprise Software

We examine whether ownership of intellectual property rights IPR or downstream capabilities is effective in encouraging entry into markets complementary to a proprietary platform by preventing the platform owner from expropriating rents from start-ups. We study this question in the context of the software industry, an environment where evidence of the efficacy of IPR as a mechanism to appropriate the returns from innovation has been mixed. Entry, in our context, is measured by an independent software vendors ISVs decision to become certified by a platform owner and produce applications compatible with the platform. We find that ISVs with a greater stock of formal IPR such as patents and copyrights, and those with stronger downstream capabilities as measured by trademarks and consulting services are more likely to join the platform, suggesting that these mechanisms are effective in protecting ISVs from the threat of expropriation. We also find that the effects of IPR on the likelihood of partnership are greater when an ISV has weak downstream capabilities or when the threat of imitation is greater, such as when the markets served by the ISV are growing quickly. This paper was accepted by Gerard P. Cachon, information systems.

Productivity and the Role of Complementary Assets in Firms’ Demand for Technology Innovations

This article uses data on transactions in the pharmaceutical industry to examine the demand-side of technology outsourcing. By integrating a transaction--cost economics perspective with the analysis of internal R&D capabilities, we find that firms with relatively more cospecialized complementary assets or relatively strong internal R&D productivity have a lower propensity to source a technology from outside the firm. We show, however, that since downstream capabilities and internal R&D are complementary activities in the presence of asset specificity and transaction costs, a decrease in internal R&D productivity reduces the marginal value of the downstream assets within firm boundaries, thus stimulating the demand for external technology. Copyright 2010 The Author 2010. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

The Cost of Integrating External Technologies: Supply and Demand Drivers of Value Creation in the Markets for Technology

We examine the classic decision faced by technology suppliers and buyers in the markets for technology: whether to compete in the product markets or cooperate through technology licensing. Prior research has indicated various factors that affect this choice, including the transaction costs of licensing, the strength of intellectual property protection rights, and the costs of acquiring complementary assets necessary to commercialize new technologies. We advance this literature by integrating into the analysis the effect of firm capabilities in transferring and absorbing knowledge and the conditioning role of cospecialized complementary assets. In particular, using a stylized bargaining model we hypothesize that the supplier’s knowledge transfer capability stimulates licensing. However, the importance of this capability decreases when licensing to industries where the typical buyer has strong absorptive capacity. Knowledge transfer capabilities are instead critical when licensing to industries where R&D and downstream activities are cospecialized. We find empirical supports for these predictions using an unbalanced panel data set with information on the licensing strategies of the population of U.S. “serial innovators,” e.g. firms with less than 500 employees and a sustained innovative activity, as evidenced by their patent holdings.

Behind the Scenes: Sources of Complementarity in R&D

Even though management consultants increasingly recommend that in-house research be outsourced, little is known about the conditions favoring substitution or complementarity between internal R&D and external technology acquisition. In this paper, we attempt to provide a deeper understanding of the firm-level drivers of complementarity between these two types of investments through the structural estimation of a flexible innovation production function, such as the translog. Our empirical analysis is based on a unique panel dataset on the R&D and in-licensing expenditures of 94 global pharmaceutical firms active in drug development between 1997 and 2005. Our results suggest that internal R&D and in-licensing in the pharmaceutical industry were neither complements nor substitutes during the study period. However, we find that the degree of complementarity is enhanced for firms with stronger absorptive capacity, economies of scope, and past licensing experience.

Participation in a Platform Ecosystem: Appropriability, Competition and Access to the Installed Base

In this study we examine the antecedents of small independent software vendor (ISV) decisions to join a platform ecosystem. Using data on the history of partnering activities from 1201 ISVs from 1996 to 2004, we find that appropriability strategies based on intellectual property rights and the possession of downstream complementary capabilities by ISVs are positively related to partnership formation, and ISVs use these two mechanisms as substitutes to prevent expropriation by the platform owner. In addition, we show that greater competition in downstream product markets between the ISV and the platform owner is associated with a lower likelihood of partnership formation, while the platform’s penetration into the ISV’s target industries is positively associated with the propensity to partner. The results highlight the role of innovation appropriation, downstream complementary capabilities, and collaborative competition in the formation of a platform ecosystem.

Digital platforms: when is participation valuable?

Assessing the benefits and challenges of knowledge spillovers.

Complementary Assets and the Choice of Organizational Governance: Empirical Evidence From a Large Sample of U.S. Technology-Based Firms

Despite the considerable volume of research on technology commercialization, the role of complementary assets in driving technology commercialization decisions remains controversial. In this paper, we provide a balanced perspective that integrates notions from transaction costs, firm capabilities, and industrial organization studies. In particular, we analyze the offsetting effects of the nature, ownership, and strength of downstream complementary assets on the gains from trade and transaction costs from alternative technology commercialization strategies. These strategies include competition in the product market, licensing, forming a technological joint venture (TJV), and selling the company to, or merging it with, holders of complementary assets. We test our hypotheses using a unique dataset encompassing commercialization transactions occurring between 1996 and 2002, among 545 technology-based firms. Our results suggest that innovators operating in industries requiring cospecialized complementary assets or possessing weak downstream capabilities, which are both associated with relatively higher sunk costs of entry in the product markets, are more likely to merge with incumbents rather than compete in the product market. Findings also suggest that innovating firms operating in industries requiring cospecialized complementary assets or possessing weak downstream capabilities, which are also associated with higher transaction costs, are more likely to adopt more integrated cooperative commercialization solutions.

Opening Up Intellectual Property Strategy: Implications for Open Source Software Entry by Start-up Firms

We examine whether a firm’s intellectual property (IP) strategy in support of the open source software (OSS) community stimulates new OSS product entry by start-up software firms. In particular, we analyze the impact of strategic decisions taken by IBM around the mid-2000s, such as its announcement that it will not assert its patents against the OSS community and its creation of a patent commons. These decisions formed a coherent IP strategy in support of OSS. We find that IBM’s actions stimulated new OSS product introductions by entrepreneurial firms and that their impact is increasing in the cumulativeness of innovation in the market and the extent to which patent ownership in the market is concentrated.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2247 . This paper was accepted by Lee Fleming, entrepreneurship and innovation .

Enhancing Research Productivity through the Market for Technology

Markets for technology typically enhance value creation though complementarities between upstream research and downstream commercialization capabilities. However, in this paper we focus on the additional benefits of external technology sourcing on the marginal productivity of internal upstream research. In particular, we focus on technology acquisitions and licensing, two of the most common external acquisition strategies in high tech industries, and certainly the most relevant in the biopharmaceutical industry, which constitutes the setting for our empirical study. We find that acquisitions enhance marginal productivity at a decreasing rate, whereas in-licensing enhances productivity when the buyer has greater science-based capabilities. Licensing and acquisitions are complementary strategies for the larger firms, since their joint adoption tends to improve synergies at the upstream research level, therefore increasing the marginal productivity of internal research.