Competition for Collaborative Marketing Alliance With a New Product Innovator
18 Pages Posted: 15 Jan 2019
Date Written: January 3, 2019
The literature on inter-firm strategic alliance is primarily focused on the stability of the alliance. There is no theory of strategic marketing alliance between a new product innovator and a firm having significant market access in the technology sector. This paper fills that gap in literature. While the innovator gets market access, their marketing partner gains due to network effect and spillover effect. Two firms having significant market access compete ala Stackelberg in the downstream game. In the upstream game, they compete to form a strategic marketing alliance with a deep-tech start-up that has innovated a new product. It was found that the Stackelberg leader can offer the innovator a larger share of the revenue from the new product, and hence wins the race to collaborate with the innovator. In equilibrium, the Stackelberg leader offers a revenue share such that it becomes non-viable for the follower firm to match it.
Keywords: marketing alliance, network effect, new product, new product pricing, revenue sharing, spill-over effect, Stackelberg equilibrium
JEL Classification: D43, L13, L14, O33
Suggested Citation: Suggested Citation