Competitive Strategy for Open and User Innovation

18 Pages Posted: 11 Apr 2019

See all articles by Gastón Llanes

Gastón Llanes

Pontificia Universidad Católica de Chile

Date Written: Summer 2019


I study the incentives to open technologies in imperfectly competitive markets with user innovation. Firms may choose to open part of their knowledge or private information so that it becomes freely accessible to users. Openness decisions are governed by a trade‐off between collaboration and appropriability: by becoming more open, a firm encourages user innovation but hampers its ability to capture value. I find that large firms are less open and invest more in product development than small firms, and that firms react to greater openness from rivals by becoming more open. I also show that compatibility and spillovers have a negative effect on openness, and that firms become more open as the number of competitors increases.

Keywords: asymmetric equilibria, compatibility choice, open innovation, openness choice, open standards, open‐source software, spillovers, network effects, user innovation

Suggested Citation

Llanes, Gaston, Competitive Strategy for Open and User Innovation (Summer 2019). Journal of Economics & Management Strategy, Vol. 28, Issue 2, pp. 280-297, 2019. Available at SSRN: or

Gaston Llanes (Contact Author)

Pontificia Universidad Católica de Chile ( email )

Vicuna Mackenna 4860

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