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Innovation in Collaboration Ecosystems: Profiting From “Walled Garden” Rivalry

Innovation in Collaboration Ecosystems: Profiting From “Walled Garden” Rivalry. David J. Teece Institute for Business Innovation Haas School of Business University of California, Berkeley September 12, 2010.

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Innovation in Collaboration Ecosystems: Profiting From “Walled Garden” Rivalry

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  1. Innovation in Collaboration Ecosystems: Profiting From “Walled Garden” Rivalry David J. Teece Institute for Business Innovation Haas School of Business University of California, Berkeley September 12, 2010 *Based on D. Teece “Profiting from Innovation”, Research Policy, December 1986; “Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise Performance”, Strategic Management Journal, December 2007; and Hazlett, Waverman, and Teece “Walled Garden Rivalry: The Creation and Co-creation of Markets in Mobile Networks, Working Paper, September 3, 2010

  2. The “Profiting From Innovation” Framework • Teece (1986, 2006), provides an analytical framework for putting innovation in an ecosystem context • Complements-in-use are often critical to commercial success • Key prediction: current and future bottleneck assets must be owned or controlled to capture value from innovation • Hazlett, Waverman, and Teece (forthcoming 2010): Market co-creation employing proprietary interfaces can allow the innovator/co-creator to capture more value than otherwise "Profiting from Technological Innovation," Research Policy, 15:6 (December 1986), 285-305; “Reflections on ‘Profiting from Innovation’”, Research Policy, 35:8 (December 2006), 1131-1146.

  3. Application to Mobile Telephony: • Carriers (e.g. AT&T) have sunk billions to create mobile networks (infrastructure platforms) • Handset manufacturers have developed sub-systems that use those networks e.g. Apple’s iPhone (closed) and Google’s Android (open), Research in Motion’s BlackBerry, Hewlett-Packard’s Palm • Handset application platforms enable customers to obtain added functionality and have stimulated innovation (apps) on the “edge” (of the network) • The “difficult to imitate” portions are the sub-systems – not the basic wireless networks..and this is where profit is being captured

  4. Conclusions • The Business Ecosystem is the nursery for innovation; and innovation over time shapes the ecosystem • In the Dynamic Capabilities Framework, entrepreneurial managers utilize the ecosystem while also trying to shape it for the firm’s advantage • Firms possessing dynamic capabilities can engage in market creation (and cocreation) while simultaneously capturing value from such activities • Tighter control of an ecosystem (in the early stages of industry and evolution) can assist market creation and cocreation (e.g. iPod, iPhone, iPad) • Control may subsequently be unnecessary and, indeed, costly.

  5. Some Research Questions • Is cooperation/collaboration inside the ecosystem desirable or undesirable? Does it thwart innovation and/or competition? • Are there circumstances where integration (“walled garden” strategies) is necessary to create market and initiate competition? • Does the PFI Framework capture the key variables that need to be considered?

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