Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel

36 Pages Posted: 4 Apr 2006 Last revised: 1 Aug 2009

See all articles by Annabelle Gawer

Annabelle Gawer

University of Surrey

Rebecca M. Henderson

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2005

Abstract

This paper draws on a detailed history of Intel's strategy with respect to the complementary markets for microprocessors to explore the usefulness of the current theoretical literature for explaining behavior. We find that as the literature predicts, Intel invests heavily in these markets, both through direct entry and through subsidy. We also find, again consistent with the literature, that the firm's entry decisions are shaped by the belief that it does not have either the capabilities or the resources to enter all possible markets, and thus that it believes it is critical to encourage widespread entry. As several authors have pointed out, this imperative places the firm in a difficult strategic position, since it needs to attempt to commit to potential entrants that it will not engage in an ex-post "squeeze", despite the fact that ex post it has very strong incentives to do so. We find that the fact that the complementary markets in which Intel competes are complex, dynamic and multilayered considerably sharpens this dilemma. We explore the ways in which Intel attempts to solve it, highlighting in particular the organizational structure and processes through which they attempt to commit to making money in the markets which they choose to enter while also committing not to making too much. Our results have implications for both our understanding of the dynamics of competition in complements and of the role of organizational structures and processes in shaping competition.

Suggested Citation

Gawer, Annabelle and Henderson, Rebecca M., Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel (December 2005). NBER Working Paper No. w11852. Available at SSRN: https://ssrn.com/abstract=872715

Annabelle Gawer

University of Surrey ( email )

Guildford, Surrey GU2 8DN
United Kingdom

HOME PAGE: http://www.surrey.ac.uk/sbs/people/annabelle_gawer/

Rebecca M. Henderson (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-543
Cambridge, MA 02142
United States
617-253-6618 (Phone)
617-253-2660 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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