Is There a Market for Work Group Servers? Evaluating Market Level Demand Elasticities Using Micro and Macro Models

This paper contains an empirical analysis demand for "work-group" (or low-end) servers. Servers are at thecentre of many US and EU anti-trust debates, including the Hewlett-Packard/Compaq merger and investigationsinto the activities of Microsoft. One question in these policy decisions is whether a high share of work serversindicates anything about shortrun market power. To investigate price elasticities we use model-level panel dataon transaction prices, sales and characteristics of practically every server in the world. We contrast estimatesfrom the traditional "macro" approaches that aggregate across brands and modern "micro" approaches that usebrand-level information (including both "distance metric" and logit based approaches). We find that the macroapproaches lead to overestimates of consumer price sensitivity. Our preferred micro-based estimates of themarket level elasticity of demand for work group servers are around 0.3 to 0.6 (compared to 1 to 1.3 in themacro estimates). Even at the higher range of the estimates, however, we find that demand elasticities aresufficiently low to imply a distinct "anti-trust" market for work group servers and their operating systems. It isunsurprising that firms with large shares of work group servers have come under some antitrust scrutiny.demand elasticities, network servers, computers, anti-trust

“Release Early, Release Often”? An Empirical Analysis of Release Strategy in Open Source Software Co-Creation

“Release early, release often” is becoming a popular new product introduction strategy in open source software development. We study the influence of release strategies on the download market share of open source projects. Using a panel data set collected from Sourceforge.net, we find that while more frequent releases are associated with better subsequent download market share, the relationship is curvilinear. Too frequent releases could backfire due to the subtle effects on the demand and supply sides of open source software production. From the demand side, we find that releasing frequently may work less effectively in projects with higher adoption costs. From the supply side, fast releases may work less effectively in projects with weak community contributions. Even when the community contributions are strong, the restrictiveness of open source license moderates the effectiveness of releasing early and often. These results have implications for managing open source projects and research on open source software, open innovation, and software adoption

Digital piracy : theory

This article reviews recent theoretical contributions on digital piracy. It starts by elaborating on the reasons for intellectual property protection, by reporting a few facts about copyright protection, and by examining reasons to become a digital pirate. Next, it provides an exploration of the consequences of digital piracy, using a base model and several extensions (with consumer sampling, network effects, and indirect appropriation). A closer look at market-structure implications of end-user piracy is then taken. After a brief review of commercial piracy, additional legal and private responses to end-user piracy are considered. Finally, a quick look at emerging new business models is taken.information good, piracy, copyright, IP protection, internet, peer-to-peer, software, music

Revenue Management and Demand Fulfillment: Matching Applications, Models, and Software

Recent years have seen great successes of revenue management, notably in the airline, hotel, and car rental business. Currently, an increasing number of industries, including manufacturers and retailers, are exploring ways to adopt similar concepts. Software companies are taking an active role in promoting the broadening range of applications. Also technological advances, including smart shelves and radio frequency identification (RFID), are removing many of the barriers to extended revenue management. The rapid developments in Supply Chain Planning and Revenue Management software solutions, scientific models, and industry applications have created a complex picture, which appears not yet to be well understood. It is not evident which scientific models fit which industry applications and which aspects are still missing. The relation between available software solutions and applications as well as scientific models appears equally unclear. The goal of this paper is to help overcome this confusion. To this end, we structure and review three dimensions, namely applications, models, and software. Subsequently, we relate these dimensions to each other and highlight commonalities and discrepancies. This comparison also provides a basis for identifying future research needs.Manufacturing;Revenue Management;Software;Advanced Planning Systems;Demand Fulfillment

The Economics of Knowledge Regulation: An Empirical Analysis of Knowledge Flows

Successful innovation depends on the management of a firm’s knowledge base. This paper empirically investigates the determinants of knowledge regulation. Using a unique survey dataset, the analysis suggests that R&D managers do not leak knowledge randomly, but rather regulate knowledge consciously. We find that the source and the channel of knowledge inflows impact knowledge regulation. The findings reveal that the more a firm profits from knowledge inflows from competitors, the fewer actions it takes to regulate outgoing knowledge. We do not find that the extent of knowledge inflows from collaborating firms impacts knowledge regulation. However, the type of channel being used to acquire knowledge matters. Compared to public channels, the different types of private channels used to access knowledge inflow and the type of the competitive relationship influence the firms’ decision to regulate knowledge outflow in the following way: concerning relationships with competitors, firms regulate knowledge outflow more when using formal channels, but less when using informal channels (although a significant difference is not found with the latter); concerning collaborative relationships, firms regulate knowledge outflow less regardless of whether they are using formal or informal private channels compared to using public channels. Presumably firms that acquire knowledge from competing firms through formal private channels compared to public channels, try to establish opaque and soundproof fences to surround them, whereas firms that acquire knowledge from collaborating firms through formal or informal private channels do not want to restrict circulation, but rather facilitate inter-firm knowledge exchange. Our results have important implications for academics and R&D managers alike

Investigating Blue Ocean v. Competitive Strategy: A Statistical Analysis of the Retail Industry

The recent work of Kim and Mauborgne (2005a) has sought to turn strategic management on its head. They note that the field has been dominated by Porter’s (1980, 1985) competitive strategy and it has placed too much emphasis on the importance of competition and rivalry. By contrast they argue in favour of an alternative strategic approach – blue ocean strategy – where firms focus on value innovation, creating consumer demand and exploiting untapped markets. So far empirical analysis in this debate has been focused on case study evidence and hence has been limited in its ability to generalise. The massive appeal of the blue ocean strategy is in stark contrast with the paucity of research testing the viability and relevance of this alternative strategic approach. In this paper we use a comprehensive data set on the Dutch retail industry in order to bring some statistical evidence to the debate. We investigate the prevalence of blue ocean versus competitive strategy in this industry over the period 1982-2000. Our results show that blue ocean strategy and competitive strategy coexist within the same competitive theoretical framework. The results highlight that the dominance of either form of strategy is not categorical but rather determined by the market conditions in which the firms operate.

Software Piracy in the Presence of Open Source Alternatives

We develop a model to investigate the manner in which the pricing, profitability, and protection strategies of a seller of a proprietary digital good respond to changing market conditions. Specifically, we investigate how product piracy and the presence of open source software alternatives (such as Open Office) impact the optimal strategy of a seller of proprietary software (such as Microsoft Office). In contrast to previous literature, we show that firms may make more (rather than less) effort to control piracy when network externalities are strong. In addition, we show that the level of network externalities amplifies losses incurred by an incumbent due to high-quality pirated goods. Therefore, for products characterized by high network externalities (such as software), sellers need to try to maintain a large perceived quality gap between their product and illegal copies. Further, we demonstrate that the appearance of an OSS alternative leads the incumbent to reduce both price and the level of piracy control. Although high-quality pirated goods are detrimental to profits in the absence of OSS, they may actually limit the incumbent’s losses and the need to adjust price and protection strategies due to the introduction of an OSS alternative. Thus, an incumbent may find it easier to compete with OSS in the presence of product piracy. Finally, highly correlated intrinsic valuation between an incumbent and OSS products require smaller adjustments to price and piracy controls and leads to muted impact on incumbent profit

Sequential Innovation in Mobile App Development

PROBLEM DEFINITION: In today’s highly dynamic and competitive app markets, a significant portion of development takes place after the initial product launch via the addition of new features and the enhancement of existing products. In managing the sequential innovation process in mobile app development, two key operational questions arise. (i) What features and attributes should be added to existing products in successive versions? (ii) How should these features and attributes be implemented for greater market success? We investigate the implications of three different types of mobile app development activities on market performance. ACADEMIC/PRACTICAL RELEVANCE: Our study contributes to the operations management literature by providing an empirically based understanding of sequential innovation and its market performance implications in mobile app development, an important industry in terms of size, scope and potential. METHODOLOGY: Using a novel data set of mobile apps in the Productivity category, we leverage text-mining and information retrieval techniques to study the rich information in the release notes of apps. We then characterize product development activities at each version release and link these activities with app performance in a dynamic estimation model. We also incorporate an instrumental variables analysis to substantiate our findings. RESULTS: We find that greater update dissimilarity (i.e., dissimilarity of the features and attributes of a new update from those of previous updates) is associated with higher performance, especially in mature apps. We also find that the greater the product update market orientation (i.e., the greater the similarity of the focal firm’s new features and attributes with respect to the recent additions of its competitors), the higher is the market performance. This finding suggests that the market rewards those developers who have a responsive policy to their competitors’ product innovation efforts. Our results also suggest that a rapid introduction of updates dampens the potential market benefits that the mobile app developers might gain from market orientation. We find no evidence of a beneficial effect of product update scope (i.e., incorporating features and attributes from other product subcategories) on market performance. MANAGERIAL IMPLICATIONS: Our study offers managerial insights into mobile app development by exploring the sequential innovation characteristics that are associated with greater market success in pursuing and implementing new features and attributes