Innovation, Openness, and Platform Control

Abstract

We explore innovation, openness, and the duration of intellectual property protection in markets characterized by platforms and their ecosystems of complementary applications. We find that competition among application developers can reduce innovation while competition among platforms can increase innovation. Developers can be better off submitting to platform control as opposed to producing for an unsponsored platform. Although a social planner would open a platform sooner and to a greater degree than would a private platform sponsor, a platform sponsor’s ability to control downstream innovation gives it reason to behave more like a social planner. However, if platforms are to perform this role, platform sponsors need longer duration rights than application developers. Results can inform antitrust and intellectual property regulation, technological innovation, competition policy, and intellectual property strategy.