Software piracy and outsourcing in two-sided markets

This paper examines the role of software piracy in digital platforms where a platform provider makes a decision of how much software to produce in-house and how much to outsource from a third-party software provider. Using a vertical differentiation model, we theoretically investigate how piracy influences the software outsourcing decision. We find that when piracy is intermediate, the loss in in-house software profits due to piracy outweighs the loss in licensing fee profits. As a result, an increase in piracy leads to more outsourcing. However, when piracy is high, it becomes too expensive for the platform provider to subsidize the software provider, resulting in a decrease in outsourcing. Moreover, when software variety is also endogenously chosen by firms, the platform provider’s incentive to develop software variety in-house depends not only on the return from software profits but also on the return from hardware profits. Under such a situation, an increase in piracy always leads to less outsourcing and less total software variety. To provide additional insights on the outsourcing decision, we conduct empirical analyses using data from the U.S. handheld video game market between 2004 and 2012. This market is a classical two-sided market, dominated by two handheld platforms (Nintendo DS and Sony PlayStation Portable) and is known to have suffered from software piracy significantly. Our regression results show that in this market, piracy increases outsourcing but has no effect on the total software variety.

     

Does new product growth accelerate across technology generations?

The academic literature on the growth acceleration of new products presents a paradox. On the one hand, the diffusion literature concludes that more recently introduced products show faster diffusion than older ones. On the other hand, technology generation literature argues that growth rate, at least as measured by diffusion parameters, remains constant across generations. We resolve this apparent paradox by testing whether growth acceleration occurs across technology generations while controlling for the passing of time. We check acceleration across 39 distinct technology generations in 12 product markets. The results show that intergeneration acceleration occurs in time to takeoff but not with respect to diffusion parameters (i.e., p and q). We show that takeoff acceleration is mostly driven by technology vintage (i.e., the passage of time) rather than generational shifts. Thus, time is a factor that accelerates early growth, but generational shifts do not. This result also holds when controlling for the effects of market vintage when the market is either business-to-business or business-to-consumer as well as when the technology is process- or product-based.     

The effect of social networks structure on innovation performance: A review and directions for research

Research on growth of innovations introduced to the market has gradually shifted its focus from aggregate-level diffusion to exploring how growth is influenced by a given social network structure's characteristics. In this paper, we critically review this branch of literature. We argue that the growth of an innovation in a social network is shaped by the network's structure. Borrowing from the field of industrial organization in economics, which defines itself as the study of the effect of market structure on market performance, we describe this new wave of research on growth of innovations as the effect of social network structure on innovation performance. Hence, social network structural characteristics should be incorporated into research on new product growth as well as into managerial marketing decisions such as targeting and new product seeding.We review how social network structure influences innovations' market performance. Specifically, we discuss (1) a networks' global characteristics, namely average degree, degree distribution, clustering, and degree assortativity; (2) dyadic characteristics, or the relationships between pairs of network members, namely tie strength and embeddedness; (3) intrinsic individual characteristics, namely opinion leadership and susceptibility; and (4) location-based individual characteristics, namely the degree centrality, closeness centrality, and betweenness centrality of an individual network member.Overall, we find that growth is particularly effective in networks that demonstrate the “3 Cs”: cohesion (strong mutual influence among its members), connectedness (high number of ties), and conciseness (low redundancy). We identify gaps in current knowledge, discuss the implications on managerial decision making, and suggest topics for future research.     

Adoption patterns over time: a replication

Marketing Letters - Based on new data, we replicate Mahajan et al.’s (1990) paper on adopter categories and Goldenberg et al.’s (2002) paper on saddles and offer explanations and...     

On the relations between demand creation and growth in a monopolistic firm

This paper deals with the allocation of resources over time by a monopolistic firm between growth of the productive capacity and growth of the market-demand capacity. As the demand-creation relations follow an S-shaped curve, different phases in the behavior of the growing firm are conceived in which investment cycles occur both in productive and demand-creation activities.The paper analyzes the case of homogeneous resources as well as nonhomogeneous resources. It is shown that in general the phases in the behavior of the growing firm are preserved in both cases. In the homogeneous case, when there are investment activities in both types of capital, it is shown that the firm will allocate its resources between the two activities in such a way that the ratio of the rate of growth of demand price (with respect to demand-creation capital) and the rate of growth of output (with respect to productive capital) will be equal to one plus the reciprocal of the elasticity of demand and will, therefore, be bounded between zero and one.     

Optimal dynamic durability

Consider a firm that adjusts its production and the choice of durability for its products instantaneously. We show that when the marginal cost with the respect to durability is nonincreasing, (a) the optimal durability for both the competitive firm and the monopolist decreases over time and (b) the monopolist will produce a good with lower durability than the competitive firm. We thus lend support for empirical findings and causal observations that found the phenomenon of declining durability over time.     

Debt and capital accumulation in a two-sector model with non-traded goods

The paper examines optimal debt and capital accumulation for an open economy which faces an imperfect international capital market. The major finding is that the optimal pattern of debt and capital accumulation is affected by relative factor intensities. Factor intensities determine whether substitution or complementary relationships exist between debt and capital. The relationship between the country's net wealth and its two components financial and productive are also determined by factor intensities.