Open or Closed? Technology Sharing, Supplier Investment, and Competition

Bin Hu (), Ming Hu () and Yi Yang ()
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Bin Hu: Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North Carolina 27599
Ming Hu: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada
Yi Yang: School of Management, Zhejiang University, Hangzhou, Zhejiang 310027, China

Manufacturing & Service Operations Management, 2017, vol. 19, issue 1, 132-149

Abstract: Competing technologies in emerging industries create uncertainties that discourage supplier investments. Open technology can induce supplier investments, but may also lead to intensified future competition. In this paper, we study competing manufacturers’ open-technology strategies. We show that despite the risk of intensifying future competition, open technologies by competing manufacturers may constitute an equilibrium and can indeed induce supplier investments. In addition, we identify a technology-risk-pooling benefit; namely, by opening technologies, competing manufacturers can induce supplier investments in both technologies and later adopt the one preferred by the market. However, manufacturers may also exhibit the prisoner’s dilemma and close their technologies despite the risk-pooling benefit. In this case, there is potential for collaborative technology sharing through cross licensing. Finally, we show that manufacturers may sometimes close their technologies to force supplier investments.This paper has an e-companion at https://doi.org/10.1287/msom.2016.0598 .

Keywords: open technology; technology choice; competitive strategy; supplier investment; procurement (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:19:y:2017:i:1:p:132-149

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