Competition, Regulation and Strategy in Industries with Consumer Side Scale and Scope Economies: An Essay in the Context of the Information Technology Industry

The IT industry (both software and hardware) is characterised by `vast consumer side scale and scope economies which are incomparably larger than in other industries with supply side network economies like pipelines or electricity distribution. In IT the supply side economies are also incomparably larger because the marginal cost of an additional unit of the software or hardware especially the former is very small. But its uniqueness arises on the demand side. The interaction of these two economies, in a situation of heightened technological dynamism, imposes a greater degree of contingency, and hence path dependency in the developments in the industry as a whole. In this respect these industries are therefore distinguished from nearly all other prior industries. It makes possible giants line Microsoft and CISCO. Even as they extract significant part of the scale economies in the form of large profits, such firms are competitive in the more relevant dynamic sense. The endogeniety of critical points in the development of the industry implies considerable scope for strategy on the part of such large firms. It also means that inter-firm linkages dynamically develop and thrive even in societies like the US that have been abhorrent of extra-market links, and have had the conceptual space to recognise only two kinds of economic coordination - within firms (managerial hierarchies) and through markets. Path dependency implies that physical clusters in IT have a far stronger economic logic, and the difficulties in the emergence of new clusters are far more severe. Traditional anti-trust like regulation or price regulation is entirely outmoded for the development of these industries. To challengers (countries and clusters) few independent options exist. Strategies with the most potential would involve promoting inter-firm linkages, promoting industries with the least need to be in contact with other firms, in fresh clusters. The effort has to be to lower the time and cost of networking with the dominant cluster. The costs of disassociation are too large even for large countries attempting to have a role in the evolution of IT industries, so that closed-door approaches are almost entirely unworkable.

Intellectual assets and value creation

The expansion of the services sector, globalisation, deregulation and the emergence of new information and communication technologies (ICTs) have brought to the fore the issue of how knowledge is created, disseminated, retained and used to obtain economic returns. This development is associated with a structural change from traditional scale-based manufacturing to new more innovation-intensive activities. These rely heavily on intellectual assets encompassing such elements as research and development (R&D), patents, software, human resources and new organisational structures. In fact, these assets have become strategic factors for value creation by firms. They are increasingly important in enabling productivity and efficiency gains, and are a crucial part of innovation in relation to business processes and products. As such, intellectual assets are central to economies? growth and competitiveness. This report presents a synthesis of the key findings to date from recent OECD work on intellectual assets and value creation with regard to three core issue areas: national accounts and estimations of investment in intellectual assets; the regional dimension of innovation, firm location and linkages; and corporate reporting, value creation and SMEs

Designing Scalable Business Models

Digital business models are often designed for rapid growth, and some relatively young companies have indeed achieved global scale. However despite the visibility and importance of this phenomenon, analysis of scale and scalability remains underdeveloped in management literature. When it is addressed, analysis of this phenomenon is often over-influenced by arguments about economies of scale in production and distribution. To redress this omission, this paper draws on economic, organization and technology management literature to provide a detailed examination of the sources of scaling in digital businesses. We propose three mechanisms by which digital business models attempt to gain scale: engaging both non- paying users and paying customers; organizing customer engagement to allow self- customization; and orchestrating networked value chains, such as platforms or multi-sided business models. Scaling conditions are discussed, and propositions developed and illustrated with examples of big data entrepreneurial firms

Public or private economies of knowledge: The economics of diffusion and appropriation of bioinformatics tools

The past three decades have witnessed a period of great turbulence in the economies of biological knowledge, during which there has been great uncertainty as to how and where boundaries could be drawn between public or private knowledge especially with regard to the explosive growth in biological databases and their related bioinformatic tools. This paper will focus on some of the key software tools developed in relation to bio-databases. It will argue that bioinformatic tools are particularly economically unstable, and that there is a continuing tension and competition between their public and private modes of production, appropriation, distribution, and use. The paper adopts an ?instituted economic process? approach, and in this paper will elaborate on processes of making knowledge public in the creation of ?public goods?. The question is one of continuously creating and sustaining new institutions of the commons. We believe this critical to an understanding of the division and interdependency between public and private economies of knowledge

The internationalization of Chinese and Indian firms: trends, motivations and strategy

The last two decades have seen significant internationalization of firms from developing economies, in terms of their greater participation in international trade, growing outflows of foreign direct investment (FDI), and a recent surge in their cross-border mergers and acquisition activity. Outward investment from developing countries is not a new phenomenon but in recent years there has been a marked increase in the magnitude of flows and a qualitative transformation in their pattern. Within this broad trend, the growing internationalization of firms from two fastgrowing developing countries, China and India, is particularly notable. Exports have been a central feature of the growth of the Chinese economy over the last three decades and, more recently, they have made a visible contribution to Indian growth too. Outward FDI from China and India has grown rapidly in recent years, and firms from these two countries are increasingly involved in overseas mergers and acquisitions

Selling packaged software: an ethical analysis

Within the IS literature there is little discussion on selling software products in general and especially from the ethical point of view. Similarly, within computer ethics, although there is much interest in professionalism and professional codes, in terms of accountability and responsibility, the spotlight tends to play on safety-critical or life-critical systems, rather than on software oriented towards the more mundane aspects of work organisation and society. With this research gap in mind, we offer a preliminary ethical investigation of packaged software selling. Through an analysis of the features of competition in the market, the global nature of the packaged software market and the nature of product development we conclude that professionalism, as usually conceived in computer ethics, does not apply particularly well to software vendors. Thus, we call for a broader definition of professionalism to include software vendors, not just software developers. Moreover, we acknowledge that with intermediaries, such as implementation consultants, involved in software selling, and the packaged software industry more generally, there are even more “hands” involved. Therefore, we contend that this is an area worthy of further study, which is likely to yield more on the question of accountability

Network industries in the new economy

In this paper we discuss two propositions: the supply and demand of knowledge, and network externalities. We outline the characteristics that distinguish knowledge- intensive industries from the general run of manufacturing and service businesses. Knowledge intensity and knowledge specialisation has developed as markets and globalisation have grown, leading to progressive incentives to outsource and for industries to deconstruct. The outcome has been more intensive competition. The paper looks at what is potentially the most powerful economic mechanism: positive feedback, alternatively known as demand-side increasing returns, network effects, or network externalities. We present alternative demand curves that incorporate positive feedback and discuss their potential economic and strategic consequences. We argue that knowledge supply and demand, and the dynamics of network externalities create new situations for our traditional industrial economy such that new types of economies of scale are emerging and "winner takes all" strategies are having more influence. This is the first of a pair of papers. A second paper will take the argument further and look at the nature of firms' strategies in the new world, arguing that technology standards, technical platforms, consumer networks, and supply chain strategies are making a significant contribution to relevant strategies within the new economy

Comparing consortial repositories: a model-driven analysis

This study aims to provide a comparative assessment of different repository consortia as a reference to inform future work in the area. A review of the literature was used to identify repository consortia, and their features were compared. Three models of consortial repositories were derived from this comparison, based on their structure and aims. The consortial models were based around either: creating a shared repository for the members, developing a repository software platform or creating a metadata harvesting service to aggregate content. Using case studies of each type of repository consortium, each model was assessed in terms of its particular strengths and weaknesses. These strengths were then compared across the models to enable those considering a consortial repository project to assess which model, or combination of models, would best address their needs and to aid in project planning