Six Challenges in Platform Licensing and Open Innovation

Abstract

This article describes six common challenges of design, incentives, and governance that arise in establishing platform businesses. It also proposes solutions. It considers, for example, how to open a platform to decentralized innovation yet still earn a return; how to incorporate best-of-breed innovations from different sources while avoiding problems of multi-party hold-up; and how to encourage sources of good ideas to contribute those ideas despite the risk of losing them to owners of indispensible complements. We express these issues and solutions as a reduced set of tradeoffs useful for managing information and technology property.

Keywords: licensing, open source, free software, dual licensing, platform, intellectual property

JEL Classification: K11, L86, O31, O32, O33, O34