Competition for Collaborative Marketing Alliance With a New Product Innovator

18 Pages Posted: 15 Jan 2019

See all articles by Sumit Sarkar

Sumit Sarkar

XLRI - Xavier School of Management

Sourabh Chowdhury

affiliation not provided to SSRN

Sarath Lavu

Indian Institute of Technology Kanpur

Date Written: January 3, 2019

Abstract

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

Sarkar, Sumit and Chowdhury, Sourabh and Lavu, Sarath, Competition for Collaborative Marketing Alliance With a New Product Innovator (January 3, 2019). Available at SSRN: https://ssrn.com/abstract=3309555 or http://dx.doi.org/10.2139/ssrn.3309555

Sumit Sarkar

XLRI - Xavier School of Management ( email )

C. H. Area (East)
Jamshedpur, Jharkhand 831001
India

Sourabh Chowdhury

affiliation not provided to SSRN

Sarath Lavu (Contact Author)

Indian Institute of Technology Kanpur ( email )

IIT Kanpur
kalyanpur
Kanpur, 208016
India

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