Trade-offs to using standardized tools: Innovation enablers or creativity constraints?

Milan Miric, Hakan Ozalp*, Erdem Dogukan Yilmaz

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Research Summary: In platform ecosystems, the creation of new products is often based on standardized development tools. Complementors often have a choice between either using these tools or creating the functionality themselves. In this paper, we study how the use of standardized development tools is related to the type of products created. By using data on the use of middleware (e.g., game engines) in the console video game market, we show that the use of development tools is associated with products that are less novel but with higher sales on average. We exploit a policy change that affected the ability of U.S.-based developers to hire foreign workers as an instrument for the use of development tools and find further support for these patterns. Managerial Abstract: When developing new products, firms often have to decide whether they base their technology on preexisting components and standardized tools or develop that technology themselves. In general, it has not been clear how using standardized third-party tools that may be available to all firms in an industry affects the nature of the products that are created. Using data on middleware components, such as game engines, in the console video game industry, this paper shows the use of such standardized tools is associated with the creation of products that are less novel but generate higher sales on average. This is an important strategic consideration for firms, but also for platforms that make decisions regarding whether such tools should be allowed on their platform.

Original languageEnglish
Pages (from-to)909-942
Number of pages34
JournalStrategic Management Journal
Volume44
Issue number4
DOIs
Publication statusPublished - Apr 2023

Bibliographical note

Funding Information:
The authors are grateful to participants in the AOM PDW on Measuring the Direction of Innovation, Munich Summer Institute, KIN Summer School, Platform Strategy Symposium, Wharton Technology and Innovation Conference and seminar participants at the University of Southern California, KIN Center for Digital Innovation and HEC Lausanne. We are grateful for comments from Ann Majchrzak, Christian Peukert, Florenta Teodoridis, Joey van Angeren, Omar El Sawy and Tobias Kretschmer. We are grateful to the editor and the anonymous reviewers. Yilmaz acknowledges the support from the Swiss National Science Foundation for the project 100013_197807. Miric acknowledges support from the Institute for Outlier Research in Business at the USC Marshall School of Business. All errors are our own.

Funding Information:
Swiss National Science Foundation, Grant/Award Number: 100013_197807; Institute for Outlier Research in Business at the USC Marshall School of Business Funding information

Funding Information:
The authors are grateful to participants in the AOM PDW on Measuring the Direction of Innovation, Munich Summer Institute, KIN Summer School, Platform Strategy Symposium, Wharton Technology and Innovation Conference and seminar participants at the University of Southern California, KIN Center for Digital Innovation and HEC Lausanne. We are grateful for comments from Ann Majchrzak, Christian Peukert, Florenta Teodoridis, Joey van Angeren, Omar El Sawy and Tobias Kretschmer. We are grateful to the editor and the anonymous reviewers. Yilmaz acknowledges the support from the Swiss National Science Foundation for the project 100013_197807. Miric acknowledges support from the Institute for Outlier Research in Business at the USC Marshall School of Business. All errors are our own.

Publisher Copyright:
© 2022 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.

Keywords

  • enabling technologies
  • modularity
  • platform ecosystem
  • platform governance
  • standardized development tools

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