How Open Should an Open System

Systems" goods-such as computers, telecom networks, and automobiles-are made up of multiple components. This dissertation comprises three esssays that study the decisions of system innovators in mobile computing to "open" development of their systems to outside suppliers and the implications of doing so. The first essay considers this issue from the perspective of which components are retained under the control of the original innovator to act as a "platform" in the system. Based on detailed review of leading systems in this industry in data spanning 1984-2004, I find that platform boundaries expand and contract over time as a means for platform suppliers to promote the adoption of the platform (by end-customers, downstream manufacturers, and suppliers of complements) and simultaneously to ensure the continuing innovation of the system. The second essay provides a systematic empirical investigation of how the extent of openness chosen by the platform supplier affected the rate of innovation of mobile computing devices. I measure openness in relation to both the boundaries of the platform and the extent to which actions were taken by platform suppliers to promote entry by hardware device manufacturers. I find regular relationships across multiple measures of innovation that suggest that the whether openness increases or decreases innovation depends on the nature of innovation and the intensity of competition between device makers. The third essay moves from device hardware to the applications software developer networks that form around opened platforms. I investigate the effect of platform suppliers' aggressive promotion of entry of software developers around their platforms. I find that while large developer networks are associated with a wide selection of software titles, that very large developer networks in fact lead to less software output. I interpret this result as revealing the importance of maintaining investment incentives-even in a context with network effects. Thesis Supervisor: Rebecca Henderson Title: Eastman Kodak LFM Professor of Management Thesis Supervisor: Michael Cusumano Title: Sloan Management Review Professor of Management Thesis Supervisor: Marc Rysman Title: Assistant Professor of Economics, Boston University