Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, May 17, 2019

Competitive Strategy for Open and User Innovation

Gastón Llanes, Pontificia Universidad Católica de Chile has an interesting paper Competitive Strategy for Open and User Innovation.

ABSTRACT: I study the incentives to open technologies in imperfectly competitive markets with user innovation. Firms may choose to open part of their knowledge or private information so that it becomes freely accessible to users. Openness decisions are governed by a trade‐off between collaboration and appropriability: by becoming more open, a firm encourages user innovation but hampers its ability to capture value. I find that large firms are less open and invest more in product development than small firms, and that firms react to greater openness from rivals by becoming more open. I also show that compatibility and spillovers have a negative effect on openness, and that firms become more open as the number of competitors increases.

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