Sequential Innovation and The Distribution of Profit: From Theory to Data

Abstract

The distribution of profit is an essential problem for sequential innovation but still lacks related empirical research. By exploring a unique dataset from a game live streaming platform, we are among the first researchers to empirically measure the contribution of upstream and downstream innovators. From the perspective of the overall industry, the optimal distribution scheme is 1:1 for general streamers and game producers and 2:1 for professional streamers and game producers. This paper argues that the optimal distribution scheme between upstream and downstream innovators is based on their contribution share. The detailed distribution scheme also depends on streamer ability, game genres and the game's popularity.

Keywords: sequential innovation; intellectual property; distribution of profit