Appropriability Mechanisms and the Platform Partnership Decision: Evidence from Enterprise Software

Management Science, Forthcoming

30 Pages Posted: 27 Jun 2012  

Peng Huang

University of Maryland - Robert H. Smith School of Business

Marco Ceccagnoli

Scheller College of Business at Georgia Tech

Chris Forman

Georgia Institute of Technology - Scheller College of Business

D. J. Wu

Georgia Institute of Technology - Ernest Scheller Jr. College of Business

Date Written: June 27, 2012

Abstract

We examine whether ownership of intellectual property rights (IPR) or downstream capabilities is effective in encouraging entry into markets complementary to a proprietary platform by preventing the platform owner from expropriating rents from start-ups. We study this question in the context of the software industry, an environment where evidence of the efficacy of IPR as a mechanism to appropriate the returns from innovation has been mixed. Entry, in our context, is measured by an independent software vendor’s (ISV) decision to become certified by a platform owner and produce applications compatible with the platform. We find that ISVs with a greater stock of formal IPR (such as patents and copyrights), and those with stronger downstream capabilities (as measured by trademarks and consulting services) are more likely to join the platform, suggesting that these mechanisms are effective at protecting ISVs from the threat of expropriation. We also find that the effects of IPR on the likelihood of partnership are greater when an ISV has weak downstream capabilities or when the threat of imitation is greater, such as when the markets served by the ISV are growing quickly.

Keywords: platform, partnership, intellectual property rights, downstream capabilities, software industry

Suggested Citation

Huang, Peng and Ceccagnoli, Marco and Forman, Chris and Wu, D. J., Appropriability Mechanisms and the Platform Partnership Decision: Evidence from Enterprise Software (June 27, 2012). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2094494

Peng Huang (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Marco Ceccagnoli

Scheller College of Business at Georgia Tech ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Chris Forman

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

D. J. Wu

Georgia Institute of Technology - Ernest Scheller Jr. College of Business ( email )

800 West Peachtree Street, NW
Atlanta, GA 30308
United States
404-894-4364 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/wu

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