May the Crowd Be with You! Firm- and Industry-Level Performance Consequences of Selective Revealing

Abstract

How do the adoption of selective revealing strategies and the consequential diffusion of knowledge affect an industry’s innovativeness? Under what circumstances is the adoption of this strategy profitable? One could suggest that large-scale diffusion of selective revealing leads to homogenization and conformity. We hypothesize instead that open innovation of this kind can increase the speed of innovation to a degree that it outweighs the equalizing effect of the knowledge sharing that often is associated to open innovation strategies. More precisely, the net effect of open innovation on industry innovativeness depends on the exact circumstances. We find that there are scenarios in which the ability of imitators to correctly retrieve knowledge and anticipate the results of adopting the revealers’ knowledge have surprisingly little influence. On the other hand, the contribution of the crowd reciprocating with its creative power to the esteemed revealers is a decisive factor.

Keywords: Selective Revealing, Open Innovation, Agent-based simulation, nk-model

JEL Classification: M21, O31, O34