Value Creation, Appropriation, And Product Design Strategies In Technology Ecosystems

212 Pages·2017·1.38 MB·English

by  Cameron D. Miller

Value Creation, Appropriation, And Product Design Strategies In Technology
Ecosystems: Three Essays On The Role Of Complementary Technologies

A DISSERTATION
SUBMITTED TO THE FACULTY OF
UNIVERSITY OF MINNESOTA
BY

Cameron Dee Miller

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY

Advisors: J. Myles Shaver, Puay Khoon Toh

May 2017
© Cameron D. Miller 2017
Acknowledgements

This dissertation represents an end to a wonderful journey. Along the way, I received
tremendous support from family, friends, and the intellectual community at the
University of Minnesota.

Committee

I am lucky to have a committee full of excellent scholars. First, I would like to thank PK
Toh. He is a great mentor and coauthor. He taught me what it meant to be a scholar in
this field and spent a great deal of time on my development, which I greatly appreciate. I
will owe much of my future success to his efforts.

Myles Shaver has been a great advisor. He asked thought provoking questions that helped
me better understand my research, while also allowing me to find my own way. I
appreciated his guidance and support throughout the dissertation process.

I am indebted to Shaker Zahra. I benefited from his perspective on my work and the field
in general. I always knew I could count on his support. I enjoyed my experience in both
doctoral classes he taught. I will miss his cheerful spirt and wise cracks.

Martin Ganco provided great support and advice during my time at Minnesota. I
appreciated his efforts. I look forward to collaborating with him in the future.

Jay Coggins was willing to be my outside reader and gave great feedback along the way.
I also enjoyed his doctoral class and his perspective on the more dismal side of
economics.

Intellectual Community

The department is full of excellent faculty, though a few made special efforts to help me
succeed. I would like to thank Aseem Kaul, Jiao Luo and Aks Zaheer for their comments
on my work. Mary Benner for her efforts to introduce me to important scholars at
conferences. Andy Van de Ven for his excellent courses. To everyone else who attend my
practice talks, thank you.

I had tremendous colleagues in the PhD program. From great discussions about research
to moral support, I feel very lucky. Cohort mates Sofia Bapna and Pankaj Kumar were
great friends through the process, as were officemates Yoohnee Choi, Taekyu Kim, and
Dennie Kim. Fellow students Paul Nary, Nick Poggioli, Maxim Kuklin, Gui Deng Say,
Rosa Kim, Min Jung Kim, attended many practice talks and are great friend. Also, to all
the graduated and junior students, thank you for your support.

i
Family & Friends

Most of all, I would like to thank my wife Janell. Her love and support has been
unwavering. Her willingness to support me as I left a career to come to the Minnesota is
quite special. She has made many sacrifices so that I could go on this journey, which I
will forever be grateful.

My son Carson who was born while I was in the program. You are a joy in my life and
the best thing to come out of my time in Minnesota.

My Mom and Dad have been very supportive throughout the journey. Their
encouragement and support have made me who I am today.

I would like to thank all our friends. In particular, Katie and Mike Provenzano, who we
spent many joyful evenings with during our time in Minnesota, and Paul Rau, who
encouraged me to apply to PhD programs.

ii
Dedication

To Janell, Carson, Joe, Eddie Jo, and Stella
iii
Abstract
Firms are often embedded in a technology ecosystem comprised of complementary
technologies that span multiple product markets. In this dissertation, I examine how
complementarity between the firm’s technologies influences its strategies to create and
appropriate value in the ecosystem. I investigate this overarching question in two contexts:
firm’s participation in compatibility standards and how it designs products for a new market.

In Chapter 2 and 3, I explore how complementarity within the firm’s technology portfolio
affects how and where it creates and appropriates value from intellectual property disclosures
to major compatibility standards. In Chapter 2, I theorize as to how a portfolio of
complementary technologies allows the firm to create value from its technological position in
an industry standard. I empirically test my prediction using data on major compatibility
standards in the information and communications technology industry. I find that firms
generate positive returns from disclosure only when they own complementary technologies. In
Chapter 3, I extend this argument to study value appropriation. I find that firms focus their
appropriation strategy around their complementary technologies.

Chapter 4 examines how product complementarities influence product strategy in a new
market. I propose that firms with complementary products will enter markets with products
that exhibit lower technical performance than firms without complementary products. I also
argue that firms choose features that function with their complementary products and will
tradeoff non-complementary features when necessary. Examining entry into the nascent
smartphone market using a rich set of data on smartphone product technology and features, I
find strong support for these conclusions. I identify complementarities within the firm’s
product portfolio as an important driver of firm’s product strategy.

Through this dissertation, I demonstrate the benefit of a more systemic view of the firm’s
portfolio, one that appreciates the relationships between the firm’s various technologies and
products, and how these relationships influence the firm’s technology strategy.

iv
Table of Contents
List of Tables......................................................................................................................vi

List of Figures...................................................................................................................viii

Chapter 1. Introduction........................................................................................................1

Chapter 2. Essay 1: Complementary Technologies And Firm Value In Disclosure During
Standard Setting.................................................................................................................10

Chapter 3. Essay 2: The Effect of Complementary Technologies On Value Appropriation
In Cooperative Settings: Evidence From Patent Litigation Related To Compatibility
Standards……....................................................................................................................68

Chapter 4. Essay 3: Strong Firms, Weak Products? The Role Of Within-Firm Product
Complementarities In New Market Entry Strategy.........................................................116

Chapter 5. Conclusion......................................................................................................180

References. ......................................................................................................................185

Appendix. Glossary of Information and Communication Industry Terms......................202

v
List of Tables
i. Table 2.1. SSOs and patent disclosures……………………………………….….61
ii. Table 2.2. Descriptive statistics……………………………………………….….61
iii. Table 2.3. Analysis of disclosure events on Tobin’s Q…………………….…….62
iv. Table 2.4. T-tests for cumulative abnormal returns …………………….………..63
v. Table 2.5. Comparing disclosures events with and without complementary
technologies…………………….……………………….……………………….63
vi. Table 2.6. Regression analysis of cumulative abnormal returns………………...64
vii. Table 2.7. Inverse probability weighted adjustment analysis of cumulative
abnormal returns…………………….……………………….…………………...64
viii. Table 2.8. Highlighting the effect of compatibility and competitiveness on the
complementary technology-cumulative abnormal return relationship…………...65
ix. Table 2.9. Analysis of yearly citation counts using fixed effect Poisson models…65
x. Table 2.10. Within-firm matching analysis of patent citations…………………..66
xi. Table 2.11. Analysis of self-citations…………………………………………….67
xii. Table 3.1. Variable Calculations……………………………………………..…108
xiii. Table 3.2. Variable Calculations……………………………………………..…110

xiv. Table 3.3. Descriptive for complementary patents and random matches………111
xv. Table 3.4. Descriptive probit analysis of litigation……………………………..111
xvi. Table 3.5. Within-firm matching analysis of litigation rates…………………….112
xvii. Table 3.6. Within-firm difference-in-difference matching analysis of litigation rates
…………………………………………………………………………………..113
xviii. Table 3.7. Fixed effect Logit and Poisson models………………………………113
xix. Table 3.8. Analysis of demand and incentive effects……………………………114
xx. Table A3.1 Lawsuits by SEP and complementary technologies……………….115
xxi. Table 4.1. Smartphone specifications and features for technical performance
calculation…………………………………………………...…….....................163
xxii. Table 4.2. Details on phone-related patent calculation………………...……......164
xxiii. Table 4.3. Descriptive statistics and pairwise correlations for product design sample
…………………………………………………………………………………..165
xxiv. Table 4.4. Technical performance regressions for firms’ first smartphone upon
entry…………………………………………………………………...……......167
xxv. Table 4.5. Technical performance regressions for firms’ first three years in the
market…………………………………………………………………...……...168
xxvi. Table 4.6. A comparison of smartphone makers with and without complementary
products…………………………………………………………………...…….169
xxvii. Table 4.7. Inverse probability weighted regression adjustment analysis of technical
performance…………………………………………………………………….169
xxviii. Table 4.8. Analysis of product design tradeoffs by complementary product type.170
xxix. Table 4.9. Market share regression models……………………………………...171
xxx. Table 4.10. Market share analysis using nearest-neighbor matching……………172
vi
xxxi. Table A4.1.1. Descriptive statistics for firms at hazard of entering the smartphone
market…………………………………………………………………………..176
xxxii. Table A4.1.2. Sample selection models of technical performance: Firms' first
smartphone upon entry………………………………………………………….177
xxxiii. Table A4.2.1. Predicting the propensity to have complementary products…..…179
vii
List of Figures
i. Figure 3.1. SEPs & complementary patents by SSO…………………………….109
ii. Figure 4.1. Worldwide smartphone sales trend…………………………………162
iii. Figure 4.2. Comparing firms with and without complementary products on the
technical performance of various smartphone features………………………...165
iv. Figure 4.3. Histogram of Technical Performance……………………...……....166

viii