Open or Closed? Technology Sharing, Supplier Investment, and Competition

59 Pages Posted: 14 Jul 2015 Last revised: 26 Apr 2022

See all articles by Bin Hu

Bin Hu

University of Texas at Dallas - Department of Information Systems & Operations Management

Ming Hu

University of Toronto - Rotman School of Management

Yi Yang

School of Management, Zhejiang University

Date Written: July 14, 2016

Abstract

Competing technologies in emerging industries create uncertainties that can discourage supplier investments. Open technology may induce supplier investments, but may also lead to intensified future competition. In this paper, we study competing manufacturers’ open-technology strategies. We show that despite the risk of intensifying future competition, open technologies by competing manufacturers may constitute an equilibrium and can indeed induce supplier investments. In addition, we identify a technology-risk-pooling benefit, namely by opening technologies, competing manufacturers can induce supplier investments in both technologies and later adopt the one preferred by the market. However, manufacturers may also exhibit the prisoner’s dilemma and close their technologies despite the risk-pooling benefit. In this case, there is potential for collaborative technology sharing through cross licensing. Finally, we show that manufacturers may sometimes close their technologies to force supplier investments.

Keywords: Technology Choice, Competitive Strategy, Supplier Investment, Procurement

Suggested Citation

Hu, Bin and Hu, Ming and Yang, Yi, Open or Closed? Technology Sharing, Supplier Investment, and Competition (July 14, 2016). Manufacturing & Service Operations Management 19(1) 132-149, Available at SSRN: https://ssrn.com/abstract=2630477 or http://dx.doi.org/10.2139/ssrn.2630477

Bin Hu

University of Texas at Dallas - Department of Information Systems & Operations Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Ming Hu (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada
416-946-5207 (Phone)

HOME PAGE: http://ming.hu

Yi Yang

School of Management, Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

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