Value Creation of Platform Mediated Networks in the Mobile Industry

Value Creation of Platform Mediated Networks in the Mobile Industry

David López-Berzosa (Business Administration, University of Leon, Veganzana Campus, León, Spain), Gloria Sánchez-González (Business Administration, University of León, Veganzana Campus, León, Spain) and Carmen De Pablos Heredero (Business Administration, Social Sciences Faculty, Rey Juan Carlos University, Madrid, Spain)
Copyright: © 2012 |Pages: 12
DOI: 10.4018/jwp.2012070103
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Abstract

This paper analyzes emerging models of governance in platform-mediated networks subject to winner-takes-all competition regimes. The results show how modularity, an important attribute in technological systems, plays an important role in competition dynamics. The study is applied to the mobile networks industry, a highly dynamic and technology intensive sector, ideally suited to conduct research on competition under strong network effects. Based on the information coming from an important firm in this sector, the paper finds that proprietary technological platforms require a large set of external contributors to ensure sustainable rates of development and innovation. The authors’ results also suggest that, contrary to established theory, firms may opt for proprietary platforms rather than shared governance models and, nonetheless, they are able to successfully compete against the established ones.
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1. Introduction

The application of information and communication technologies and the economic globalization offer firms the opportunity to develop new knowledge and increase the possibilities of accessing and spreading this knowledge through learning processes that generate new capabilities. These circumstances have promoted a change in the economic paradigm that offers a new perspective of innovation (Cooke, 2001). In this sense, the concept of open innovation first proposed by Von Hippel (1986, 2006) and Chesbrough (2007) refers to an emerging paradigm in which firms innovate relying on both internal and external firm resources.

De Jong et al. (2008) define open innovation as the purposed usage of internal and external flows of knowledge to accelerate internal innovation and expand markets for the external use of it. In this vein, the concept of Open Innovation departs from previous innovation modes in which oftentimes existing processes at the firm erect barriers to external knowledge thereby reducing absorptive capacity (Chesbrough, 2002).

In this context, relevant research into innovation by users (von Hippel, 2006) concludes that users have played a prominent role in product development, not only in traditional industries such as textile or chemistry, but more recently in software or semiconductor industry. Moreover, there exists empirical evidence of the relationship between user’s involvement in product development and market’s acceptance (Franke, 2003). User’s willing to take part into product improvements or the development of new concepts, have important characteristics as far as companies are concerned: They are currently experiencing needs which shall be later requested by regular consumers while, usually they are also capable of providing solutions to their own needs thereby conducting innovations by themselves.

There exists a great amount of literature documenting how companies have engaged with this kind of users, termed Lead Users (Thomke, 2002; von Hippel, 2002; Lakhani, 2003; Jepennsen, 2006). Prior studies have discussed the process of attracting, motivating and organizing users through communities that donate complementary goods and services (e.g., Lakhani & von Hippel, 2003; Jeppesen & Frederiksen, 2006; West & Gallagher, 2006).

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