Products, Platforms, and Open Innovation: Three Essays on Technology Innovation

High technology industries, where IT artifacts are core to the business model of a firm, are marked by a high level of market competition and uncertainty. Firms within these industries are constantly evolving at a swift pace. Products and services developed in these industries have the shortest life cycle from product development to maturity, compared to those developed in other industries. According to a 2015 KPMG report, products and services in the high technology industry have an average maturity life cycle of 0.5 - 5 years, which is the shortest among all sectors (KPMG, 2015). Value generation and capture from these products and services must happen in a shorter duration compared to those from other industries. Imitation of products and services in these industries is also rampant, diminishing opportunities to generate value from innovative products and services. According to extant research, imitation among vendors in the IT sector is widespread, and firms mimic direct competitors in the introduction and withdrawal of products and services (Ruckman et al., 2015; Rhee et al., 2006). While the inherent nature of products developed in the IT industry and the associated incremental innovation leads to better performance gains, these gains erode quickly via imitation from firms competing in the same domain (Ethiraj et al., 2008). For many firms, these issues lead to a shift in their revenue generation model. Rather than appropriating the value from direct sales of products and services, firms have slowly started opting for innovation strategies that allow rent-seeking through opening up the business and revenue models of the firm. These strategies may include but are not limited to, adopting open standards for their products and services, establishing platform business models and engaging in open innovation. In this thesis, I assess these three innovation strategies and their value to a firm in terms of product and services and related value performance. In the first essay of this thesis, I start by examining the lifecycle of products in information technology-intensive firms, which is deemed to be shorter compared to other industries. I call these products complex assembled digital products (CADP). In the product innovation literature, the emergence of a dominant design configuration in a product category is seen as the start of a technological lifecycle that allows winners of the industry to appropriate long-term returns through incremental innovation. In the context of a complex assembled digital product, a dominant design will manifest itself as a single dominant design configuration or a narrow set of configurations that represent a majority of the products manufactured in a product category (Tushman & Murmann, 1998; Cecere et al., 2015). However, in technology-intensive firms, two challenges need further exploration. Firstly, due to the pace of innovation in technology-intensive industries, it is highly likely that a dominant design configuration never emerges (Srinivasan et al., 2006). Secondly, due to the modular nature of the products, even if a dominant design is achieved, it is achieved at the configurational level. It manifests itself as the set of components that achieves dominance in a product configuration (Murmann & Frenken, 2006). In the first essay, I examine the evolutionary attributes of the components of a CADP, which enable the components to become and remain part of the dominant design configuration of the product for a longer duration. I model the entry and survival of a component in a dominant design configuration using three evolutionary attributes: (1) pleiotropy of the component, (2) openness of the standard supporting the component, and (3) innovation source of the component. Pleiotropy as a construct is adapted from evolutionary biology and defined as the number of functionalities supported by a component. The standard supporting a component can be open or proprietary. The innovation source can be internal to the industry or external. I empirically test my hypotheses using a rich, longitudinal dataset of TV models spanning 15 years (2002-2016). The results show that components that have higher pleiotropy and that are supported by open standards not only have a higher chance of being selected into the dominant design configuration of TVs but also remain in the TV market for a longer time. However, while components developed through endogenous innovation efforts were nearly four times more likely to enter the dominant design configuration of TVs, their longevity was not significantly different from that of the components sourced exogenously. In the first essay, I look at how adopting components with specific sets of attributes allows firms to win a product market and appropriate value for a long duration from product development. In the second essay, I shift my focus from a product-based business model to a platform business model as an innovation strategy to achieve a competitive advantage. In recent years we have observed the emergence of platform businesses across domains of information technology-intensive industries (van Alystyne and Parker 2016). Firms are either completely shifting to platform business models or starting to include platform business models as part of their business strategy portfolios. Newer firms in these industries are more likely to adopt a platform business model as the core model for value generation and value capture. Seven of the ten most valuable companies in the world have opted for a platform business model as part of their overall business strategy (Cusumano et al., 2019). However, not all firms adopting the platform business model succeed in dominating the market. An exploratory study examined the success of platform businesses in terms of the number of years the firm remained in business. Taking a 20 years dataset of the firms in US markets, it was observed that only 43 out of 252 platform firms flourished are still active (Yoffie et al., 2019). Most of the surviving firms have to spend a considerable amount of resources in incentivizing the stakeholders of the platform, R&D, and marketing activities to stay relevant in the market (Cusumano, 2020). In Essay Two, I investigate the effect of a platform innovation on a firm’s performance under competitive threats. As argued earlier, technology-intensive firms operate in an ever-changing environment where competition is continuously evolving and mimicking the products of the focal firm. This constantly evolving product market competition is inherent in high technology industries. While product market competition encourages the overall pace of innovation as seen in technology-intensive industries, we are not aware of its effect on value generated by the firms operating in those industries. In the second Essay, I model the effect of product market competition on a firm’s performance. I look at how adopting a platform business model mitigates the effect of product market competition on a firm’s value generation. I use a machine learning-based firm classification method to measure the business model adopted by a firm. I extracted data from 10-K annual reports of the sample firms and classified the firms as platform or non-platform based on the supervised classification of 10-K annual reports of the firm. Using a 20-year panel of the firm’s financial data and their business classification, I explore the effect of a platform business model on a firm’s performance under high product market competition. My results suggest that adopting a platform business model can be an effective business strategy in delivering better value in general and under high market competition in particular. A third innovation strategy that has found favor with firms in recent years to build a competitive advantage over rivals is engaging in open innovation. Open innovation is defined as “a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” (Chesbrough, 2003). In the context of information technology-intensive firms, open innovation manifests itself in many ways. In recent years, for-profit firms have started engaging with open-source communities to develop products and services on social coding platforms like GitHub. According to my investigation, 41 of the top 100 firms by market valuation have a direct presence on GitHub and actively develop their products with support from open-source developer communities. Opening up open software products and services for the world is another way that allows for faster development and propagation of products across user and developer communities (Khan, 2018). Firms also sponsor open source community developed products and regularly sponsor summer coding schools and hackathons (Mitchell, 2012). These open innovation events have shown promise in the collaborative development of products and services (Tereweisch and Xu, 2008). Firms appropriate rents by selling complementary services for the products they are developing as open-source. In his famous 1997 book, “The Cathedral and the Bazaar,” Eric Raymond coined the term “Cathedral” model of software development to represent the closed sourced, hierarchical and proprietary model of software development and “Bazaar” to represent the open-source, free and equality based software development model (Raymond, 1997). However, there is limited empirical evidence to suggest that firms create and capture value on open innovation platforms like GitHub (West et al., 2014). We do know that firms have started selective revealing of their accumulated knowledge and started engaging with open source communities (Fosfuri et al., 2008; Henkel et al., 2014; Alexy et al., 2018). In the third Essay, I investigate the effect of open-source engagement on the economic outcomes of a firm. More specifically, I look at how engagement on the open-source platform and intensity of that engagement influence the financial performance of a firm. To investigate the influence of open-source innovation on a firm’s financial performance, I created a data set containing all continuous open-source engagements of firms in high technology sectors. I collected this data from multiple sources, including GitHub, 10-K reports, and a search of innovation contests organized by firms. I then matched this data set with the financial information of the firms. I employed the generalized synthetic control method (GSynth) to estimate the model. I estimated the dynamic panel data regression model to measure the influence of open-source engagement intensity on financial performance. Additionally, I also investigated the heterogeneity in the effect of open-source engagement on the financial performance of the firm using the random causal forest. My results suggest that open-source engagement and its intensity positively influence the financial performance of a firm. The effects are heterogeneous and based on the absorptive capacity of the firm, market competition, and other environmental factors. I explore and discuss the implications of my findings on open-source engagement choices by firms. Finally, I conclude this dissertation with the findings of my essays and their implications on information technology-intensive firms. I provide additional details about my studies in the Appendices. The Appendices also highlight the additional analysis done during the research to test the robustness of the results. Overall, this dissertation has broader implications for research and practice alike. There are opportunities for future research and investigation into various innovation strategies adopted by firms in high technology industries. This research also provides directions for applying novel research methods, like the generalized synthetic control method and machine learning algorithms, in IS research

Governing collaborative interactions - a multiple-case study on the platform governance of peer-to-peer marketplaces

Globally successful peer-to-peer services have inspired rapidly growing interest in platforms. Besides having become an established part of recent economics research, both collaborative consumption and platforms have found their way into our everyday lives through smart phones and news headlines, embodying the changes and opportunities brought about by digitalization. This study contributes to the ongoing discussion from an entrepreneurial viewpoint by aiming to answer the research question: how do platform entrepreneurs govern peer-to-peer marketplaces? The question is answered through three overlapping phases of research. First, previous and recent literature is reviewed and critically examined to map different definitions, theories and approaches. Second, an entrepreneurial lens is applied by focusing on the more concrete level of decisions and actions done on platforms. A contextual framework for studying platform governance, i.e. the means and mechanisms of steering, controlling, and managing them, is identified by evaluating and comparing relevant theories found among the literature streams. Third, the governance mechanisms are explored in real life situations among six peer-to-peer platforms. The empirical part of the research is conducted by utilizing the contextual framework in a comparative multiple-case study on six peer-to-peer platforms, which represent three different types of marketplaces. While a subjectivist view of multiple individual realities and subjective meanings is followed, methodologically the study represents interpretive qualitative research, where the focus is on understanding meaning in context. Primary data have been collected through one-on-one case interviews with platform entrepreneurs, and secondary data through a quantitative data set received from the marketplace platform provider Sharetribe. The results of the study depict the current field of peer-to-peer online marketplaces as well as the topics and issues confronted by entrepreneurs. The theoretical framework identified in the literature review is utilized in within- and cross-case analysis between the six platforms as well as the three marketplace types. No significant differences or similarities either within or across the different types are identified – however, the results indicate specific areas of interest for further research. The empirical findings are used to develop the governance mechanism framework further in the context of collaborative consumption. The analysis reveals that all the marketplaces represent either reactive or proactive approach for platform development, and suggests this as a noteworthy starting point for following research. Even though a case study is not one to be used for making broad statistical generalizations, by combining theoretical views and an empirically developed framework this study is of value to anyone involved or interested in managing platform business

The Anesthesia Continuing Education Market and the Value Creation From a Sustainable Unified Platform

Practicing anesthesia professionals in the United States are all governed by various profession-specific regulatory bodies that mandate continuing education (CE) requirements. To date, no unified resource exists for anesthesia professionals (i.e., Anesthesiologists, Certified Registered Nurse Anesthetists, and Anesthesiologist Assistants) to explore the CE offerings available within the marketplace. This study endeavored to convey the potential value of a unified anesthesia CE resource. It investigated how to cultivate a sustainable platform to potentially improve how anesthesia professionals search available CE offerings and to potentially enhance how anesthesia CE providers reach anesthesia professionals. This qualitative study was conducted utilizing an integrative review of the literature. The key concepts identified and investigated were network effect, segmentation, first to market, best of breed, search costs, transaction costs, minimally viable product, evolutionary phases of platforms, platform theory, platform business model, platform economy, and types of platforms. Inductive content analysis was chosen as the organizational method for the resultant qualitative data. The goal of the analysis was to create a conceptual, practical, and strategically applicable platform paradigm for the anesthesia CE marketplace driven by the insights and amalgamations from the literature. The analyzed concepts, dimensions, and indicators of platform successes and their applications potentially facilitate anesthesia professionals’ CE explorations and CE providers’ marketing efforts, as well as contextualize the overarching impacts and implications onto the anesthesia CE industry and beyond. The conclusion portrays these impacts and implications

Post-Bureaucratic Organizations: Normative and Technical Dimensions

Thesis advisor: Juliet B. SchorIn this dissertation, I study dynamics of inequality in three post-bureaucratic organizations: a makerspace and two on-demand labor platforms for couriers. I focus on three aspects of post-bureaucracy: 1) Identity work and social clorure. 2) Dynamics of status and distinction making. 3) Technology as an alternative to rational-bureaucratic and value-rational organizations, and the experience of technologically organized work. Collectively, these cases explore how institutional orders are created, reproduced, and transformed in organizations that reject interpersonal authority relationships. As a social technology for coordinating activity, bureaucracies rely upon formalized rules, responsibilities, and impersonal authority relationships. In a completely rationalized bureaucracy, coordination is achieved through rigid adherence to codified roles and procedures, as well as deference to designated superiors within a bureaucratic hierarchy. Post-bureaucratic organizations, by contrast, eschew formalized interpersonal authority relationships - typically emphasizing normative and technical controls. For example, many high-tech organizations group workers into teams that negotiate and enforce norms. Material technology may also be used by organizations as a method to coordinate and manage workers, as in the case of on-demand labor platforms that direct workers via software technology. Like conventional bureaucracies, post-bureaucratic organizations are susceptible to a variety of pathologies. Two tendencies, however, are particularly salient: anomie and reification. Technical control involves reifying aspects of an institutional order that otherwise would be interactively negotiated and enforced. One risk in reifying an institutional order is that it will be incapable of responding to changes in the environment. In contrast to the problem of an institutional order that is too stable, anomie is a quality of normlessness and an ambiguous institutional order. Previous research suggests commitment forms of organizing are susceptible to anomic tendencies. In such weakly institutionalized environments where norms are open for negotiation, there can be considerable competition between individuals over how to define norms and practices. These individual status competitions may come at the expense of collective goals, in addition to being an avenue by which race, gender, and class inequalities are produced and reproduced.Thesis (PhD) — Boston College, 2018.Submitted to: Boston College. Graduate School of Arts and Sciences.Discipline: Sociology

The Influence of Product Design on Switching Decisions for Capital-intensive Technologies: The Case of MRI Purchasing in Research Facilities

This research investigates the role of product design on technology switching in the context of a capital-intensive product. I focus on switching rather than on new sales because switching is the primary means of changing market share in nearly mature markets. Further, the dominant logic — is that, because of switching costs and the related consequences, incumbents have a strong advantage when upgrading or replacing equipment. However, the literature on lead users suggests that those users at the cutting-edge are willing to meet the costs of changing technology because they have the capabilities needed to leverage significant advantages from the new technology. The extant literature on switching focuses primarily on consumers in highly competitive markets. There is little understanding of the antecedents of switching in business markets, especially in markets for capital-intensive technology-based products. This research investigates the influence of product design on switching behavior for capital-intensive high technology products, where buyers are faced with numerous implications and significant costs at each step of the process. The switching behavior for capital-intensive products has not been studied previously; because of this deficiency, we do not know the consequences for theory, that is, how different theoretical assumptions will contribute to the final decision to switch, or for managerial practice, that is, the kind of strategies managers should follow to retain existing buyers under such conditions. Previous literature did not explore explicitly the concept of product design as an influence on switching, because satisfaction and switching cost were widely used as determinants of switching decisions in competitive markets. This gap in knowledge is due to the difficulty in identifying a method that would allow one to differentiate among the products’ performance and how the difference would impact consumers’ objectives. It is also difficult for researchers to define the characteristics of high technology products that make certain products more attractive on the market than others, without substantial assistance from experts in particular products. These conditions create a barrier to investigating switching behavior for high technology products. This research is positioned in the overlapping area between product design and switching behavior. The linkage between these two bodies of literature has never been explored. The research answers two important questions: (1) what are the antecedents of technology switching in a context where there are considerable costs?, and (2) does product design encourage technology switching behavior? Dynamic capabilities theory is used to explain this research, because the decision to switch an old technology for a new one in rapidly changing technology markets is about renewing resources and capabilities to maintain competitive advantages. This research is conducted in the context of the Magnetic Resonance Imaging (MRI) industry as a case study. Considerable switching has occurred in this industry over the last decade, resulting in this industry offering a good opportunity to investigate the reasons why. The market is divided into different segments based on the region and the health care system. I selected the university hospitals segment, MRI research centers, to conduct this research study, because it is feasible to track the technology switching process for this segment over time and because this segment’s market is nearly mature. Data were collected from multiple sources including personal interviews, online surveys, annual conference database, product technical reports, and patent data. In this study, the independent variable is product design and other variables related to switching costs and marketing strategies. The dependent variable is switching behavior, which has two values: (1) “switched,” defined as purchasing a new technology from a different supplier, and (2) “not switched,” defined as repurchasing from the same supplier. After collecting surveys from decision makers who purchased MRI technology, I use logistic regression analysis to test the hypothesis that the product design has a direct impact on the switching decision of capital-intensive products. Research findings have shown that buyers are willing to switch to a different technology in spite of high associated costs, particularly when they are faced with a product that restricts their capabilities. Product design represents the most influential factor underpinning switching, because it provides more capabilities that motivate switching. Notwithstanding the fact that moving to a new supplier imposes significant challenges, including technology and relationship incompatibility, findings confirm that this distinction in product capabilities has induced some MRI buyers to move to a new supplier in order to maintain a competitive market position. The findings also confirm that support during the transition process can be achieved through marketing strategies. The findings of this research clarify our understanding of the switching behavior of capital-intensive products where successful product design is expected to play a significant role. This behavior is expected to be different from the behavior identified in previous research, because the previous research was conducted using mainly competitive markets with frequently purchased products. For lead users faced with products that restrict their capabilities, switching is an expected option despite high switching costs. Those early switchers, having capitalized on the real value of the new product, serve to encourage other users to pursue the same behavior later. The outcomes from this MRI study — as one example of a high technology device — could be applied to the different industries that share the same characteristics in terms of high rates of technological change and high switching costs, for example, military devices, aircrafts, and advanced medical and industrial devices.1 yea

Research on cost management methods used in new product development and their relationship to strategic priorities and collaborative competences: A systematic literature review and survey of the German manufacturing industry

This doctoral thesis presents a systematic review in both the management accounting as well as the innovation and operation management literature on 15 different methods for cost management. Subsequently, six antecedents of the adoption of cost management methods are identified and empirically analysed. It was found that the antecedents explaining the adoption of this methods during NPD are cost leadership