[Research summary: Within an ecosystem, standard setting coordinates development of complementary technologies across firms. But each firm can itself own multiple of these complementary technologies.We study how a firm’s own complementary technologies influence its disclosure inclination during standard setting. We identify a tradeoff: disclosure increases value-creation of the firm’s non-disclosed complementary technologies, but also heightens expropriation risk. Using data on the U.S. communications equipment industry 1991–2008, we show that the firm’s complementary technologies increase its disclosure inclination when its technological areas are less crowded, but decrease such inclination when there are SSO members with strong expropriation abilities. Findings stress that disclosure involves but a piece of the firm’s portfolio; a systemic perspective of the entire portfolio provides a more comprehensive picture of value-creation during standard setting. Managerial summary:Why should a firm disclose its key technology to participate in standard setting within an ecosystem? We urge managers to think beyond “disclosing to ensure compatibility with other firms’ complementary technologies within the ecosystem” as a motivation, to also consider how disclosure affects the firm’s own complementary technologies within its portfolio. Disclosure in one technological area makes the firm’s nondisclosed complementary technologies in other areas more valuable to itself, especially with fewer rivals competing in these other areas. But disclosure also renders the firm susceptible to losing these complementary technologies to rivals, especially when rivals have strong expropriation abilities. Analyzing disclosure decisions by communication equipment firms, we show that this tradeoff is indeed a relevant consideration in managers’ strategic calculations when participating in standard setting.]

Abstract Research Summary When and how does a firm generate positive returns for itself as it coordinates technological development in ecosystems via standard setting? We depart from the convention of examining a firm's disclosed standard essential patents (SEPs), to instead focus on its nondisclosed complementary components. Using data from the information and communication technology industry from 1988 to 2010, we demonstrate that a firm that discloses SEPs generates higher returns when it has more nondisclosed complementary components, especially when they are firm‐specific. We further demonstrate the mechanism by showing at a component level that disclosure raises the value of nondisclosed complementary components. Findings suggest that adopting a systemic perspective over the firm's entire portfolio to include its complementary components provides a more comprehensive understanding of returns from coordination within ecosystems. Managerial Summary Compatibility standards provide the blue print behind the core technological platform in many ecosystems. During the standard setting process, firms disclose their ownership of intellectual property essential for the standard to function (SEPs). We study when such disclosures benefit the firm by examining the change in firms' equity market valuations. We find that firms generate positive returns when they own nondisclosed components that are complementary to their disclosed SEPs. We also find that the nondisclosed complementary components increase in value after the disclosure of SEPs. Our findings point to how managers can leverage standard setting to create and capture value in their technology portfolio beyond the licensing of SEPs.

Abstract Research Summary We study product digitization as an impetus for firm strategy change. Product digitization can erode a firm's ability to differentiate through physical product attributes and prompts them to increase emphasis on nonphysical product attributes to sustain their competitive advantage. We expect this effect is pronounced among firms that have pursued a physical differentiation strategy prior to the digital age. However, we expect that countervailing forces exist such that the internal supply cost of and the external market demand for the nonphysical differentiator mitigate this effect. Evidence from publishers in the Amazon Kindle e‐book ecosystem supports our hypotheses. This study bridges the growing digital strategy literature and the classical competitive strategy literature. We discuss how our findings are relevant to a range of industries. Managerial Summary Many companies invest in superior physical product attributes to increase a customer's willingness‐to‐pay and entice purchase. However, when products become digitized—such as music streaming displacing CDs or e‐books replacing printed books—the effectiveness of physical product differentiation is diminished. We examine how book publishers manage this challenge at the advent of Amazon's Kindle e‐book technology. We find that publishers that have emphasized physical product attributes turn to emphasizing nonphysical product differentiation, namely, through offering more content. Yet, the extent of the strategy change is limited by the internal development cost of and the external demand for the nonphysical differentiator. We discuss how our findings are relevant to a range of settings, including both product and service companies.

Abstract Research Summary In ecosystems, tensions between value creation and appropriation can arise when complementors form relationships with a partner that benefits from network effects. While creating value collectively, these relationships strengthen the network effects, which increase the partner's ability to appropriate value. We posit that complementors strategize their product offerings to benefit from the relationship with the partner while preserving bargaining power by keeping relationships with other partners as outside options. We examine book publishers' product portfolios in the Amazon Kindle e‐book and the printed book ecosystems. Our results illuminate specific product offering decisions by large publishers that are more protective of the printed book ecosystem and less conducive to Kindle's success. This research adds to the literature on interorganizational relationships, platform ecosystems, and managing digital innovations. Managerial Summary How do book publishers deal with Amazon? This paper compares book publishers' product offerings on Amazon's Kindle digital platform and in the physical print channel. We find that publishers offer high demand products as e‐books on Kindle to benefit from logistics savings. Yet, relative to small publishers, large publishers product decisions that support Kindle less, such as withholding some of their greatest revenue generating books. Such decisions could both limit Kindle's attractiveness to the consumers and preserve the economic viability of the print channel as an outside option. These findings improve our understanding of how companies can leverage their product portfolios to both benefit from digital technology efficiencies and maintain their bargaining power vis‐à‐vis digital platforms.

Abstract Research Summary When firms diversify technologically, they often acquire human capital from competitors. Legal challenges emerge when intellectual property (IP) safeguards are involved. We examine a firm's ability to initiate IP litigation or protect against litigation (i.e., litigation ability) as an antecedent to its technological diversification. We demonstrate that an unexpected reduction in firm's litigation ability is associated with a temporary decline in its entry into new technological domains. Furthermore, we find that the negative effect is stronger when the firm's existing inventors cannot be easily utilized in the new domain or when interfirm mobility in the new domain is low. These findings extend prior work by highlighting a proactive role of the firm's litigation ability that spans beyond protecting the firm's existing IP. Managerial Summary To diversify successfully, the firm often needs new knowledge that can be acquired by hiring new research personnel. However, these inventors may come from competitors and their knowledge may be protected by IP safeguards. We examine how the firm's ability to initiate and protect against IP litigation influences its technological diversification. We find that an unexpected reduction in a firm's ability to litigate temporarily reduces its expansion. The negative effect is magnified when considering expansion into domains where the firm's existing inventors cannot be utilized or where the intermobility of inventors is low. Our findings suggest that the ability to both protect IP and avoid litigation are important factors in a firm's diversification strategy.

We document the ability of the credit default swap (CDS) market to anticipate favorable as well as unfavorable credit rating change (RC) announcements based on more extensive samples of credit rating events and CDS spreads than previous studies. We obtain four new results. In contrast to prior published studies, we find that corporate RC upgrades do have a significant impact on CDS spreads even though they are still not as well anticipated as downgrades. Second, CreditWatch (CW) and Outlook (OL) announcements, after controlling for prior credit rating events, lead to significant CARs at the time positive CW and OL credit rating events are announced. Third, we extend prior results by showing that changes in CDS spreads for non-investment-grade credits contain information useful for estimating the probability of negative credit rating events. Fourth, we find that the CDS spread impact of upgrades but not downgrades is magnified during recessions and that upgrades and downgrades also differ as to the impact of simultaneous CW/OL announcements, investment-grade/speculative-grade crossovers, current credit rating, market volatility, and industry effects.

Abstract Research Summary Platform owners often use endorsements to actively manage complementor firms. We argue that the direct network effects of complementors' products play a central role in the platform management by its owner. We test our predictions using data on the Apple's promotion of apps. We find that apps with network effects are more likely to receive an award. This likelihood increases when the app is introduced by a developer with a larger market share but declines when introduced in a concentrated segment. The likelihood decreases further if the app is introduced in a concentrated segment by a developer that holds a larger market share. Further, we observe that in concentrated segments, the “challenger” developer has a higher likelihood of receiving the award relative to the leader. Managerial Summary Many products offered through platforms have their own direct network effects. The value of the product for each user grows with the number of other consumers using the product. Many platform owners also actively manage their platforms to ensure platform growth and often use less traditional tools such as product endorsements to achieve this goal. In the context of video games listed in the iOS App Store and the Editors' Choice Awards as a form of product endorsement, we examine the tradeoffs that products with direct network effects (i.e., multiplayer video games) present to the platform owner (Apple). On the one hand, the platform owner may want to promote apps with direct network effects to help them achieve a momentum in terms of user growth. On the other hand, networked apps may become dominant in the segment with negative implications for future growth of the segment and the platform owner's profitability. We find evidence consistent with this tension and find that it critically depends on the complementor strength and market segment concentration. We also observe that in concentrated segments, the “challenger” developer has a higher likelihood of receiving the award relative to the leader.

Borrowing nomenclature and concepts from ecology and evolutionary biology, we apply descriptive exploratory methods to extend our understanding about the complex dynamics of an entrepreneurial ecosystem. We take a holistic approach to ecosystem analysis, and we analyze the evolution of multiple activities (i.e., entry, exit, growth, and survival) within an entrepreneurial ecosystem and the interactions of these activities with the ecosystem actors and resource providers. Applying our approach to nearly the entire population of academic spin-offs in Norway from 2000 to 2015, we generate a number of important findings. By characterizing the dynamics of an entrepreneurial ecosystem, we take a major step towards theorizing the ecosystem perspective. Our findings have important implications for public policies targeted to promote academic entrepreneurship.