Resolving the Innovation Diffusion Paradox on Open Innovation Platforms: A Developer's Perspective

Abstract

Open innovation platforms, such as Google Play, and APKPure, have cultivated a thriving ecosystem by encouraging third-party developers to place digital products on their platforms (Vrande et al. 2009). Open innovation platforms encapsulate an Integrated Development Environment (IDE) that is publicly accessible, along with a host of sharable features and functionalities (e.g., APIs, customized templates, and data analytics) for developers. It has enabled developers to accelerate the development of digital products, such as software applications and mobile games (Reuver et al. 2017; Tiwana 2015). Rapid product development has resulted in a climate of an innovation explosion. It is, however, inevitable that these platforms have culminated in a dense concentration of products vying for attention in the same virtual space. As repeatedly reported as an issue, more than half of the smartphone users (51%) download zero mobile apps every month. Nevertheless, approximately 66.84 thousand mobile apps were launched in Google Play alone in Jan 2022. In other words, the rapid pace at which digital products are being introduced onto open innovation platforms has impeded their diffusion, a phenomenon that we refer to as an innovation diffusion paradox. Therefore, open innovation platforms appear to be heading towards a predicament where many digital products can never capture customers’ attention. Developers confronted with the innovation diffusion paradox may encounter greater difficulty in gaining attention and disseminating products to customers on open innovation platforms. In this regard, most developers are faced with the challenge of creating sustainable strategies that will allow them to stand out from their competitors and attract customers over time.

Analyzing the implications of exponential growth in digital products on open innovation platforms through the comparison with competitors, Study 1 examines the consequences of comparative product proliferation strategies in open innovation platforms. When a developer strives to maximize its product diffusion, it has to formulate product proliferation strategies that gain more exposure for its product to more effectively attract market traffic. Nevertheless, a paucity of studies examines how such strategies play out for digital products and their effects on developers. To this end, Study 1 synthesizes extant literature on digital products and product proliferation strategies to advance a theory of comparative proliferation strategies for digital products. It delineates comparative proliferation strategies for digital products into three dimensions (i.e., comparative product diversification, comparative product launch, and comparative product evolution) and assesses their impacts on the developer’s competitive diffusion in terms of diffusion rate and diffusion diversity between developers and their competitors on open innovation platforms. Analyzing data from a mobile application platform, Study 1 find that different dimensions of comparative proliferation strategies have varying impacts, as predicted by our theoretical model. When the intensity of comparative proliferation strategies increases, the developer’ competitive diffusion rate increases; meanwhile, comparative product launch and evolution have an inverted U-shaped impact on the developer’ competitive diffusion diversity. The results provide a point of departure to the extant understanding of product proliferation literature by integrating it with distinct characteristics of digital products and open innovation platforms to explain diffusion effects from a comparative standpoint.

The purpose of Study 2 is to answer two research questions from a customer’s perspective, emphasizing the perception of developer image: Can a developer strategically plan its development process of digital products to ensure optimal performance within an open innovation platform? If so, is that relationship mediated by developer image? Accordingly, the objectives of Study 2 are two-fold: (1) to conceptually delineate how patterns in a developer’s development process of digital products can drive developer performance; and (2) to empirically assess how patterns can be converted into an increased developer image from the standpoint of customers and ultimately into an increase in customers’ product download incidence. Two sub-studies are conducted to answer the two research questions. Study 2.1 utilized the data set of 8915 developers from the exact mobile application platform where Study 1 was conducted. The developers’ development processes of digital products were analyzed, their total product downloads were obtained to determine developer performance. Following that, study 2.2 replicates the effects of development processes of digital products on developer performance and validates the mediating effects of developer image. Three separate sources of data were utilized: (1) A survey was conducted across the store-wide and 392 users to elicit perceptions of developer image dimensions, and (2) following which, behavioral data on each participant was obtained with the help of the mobile application platform to capture individual downloading actions representing the dependent variable, individual download incidence; and (3) separately, objective data of developers’ development processes of digital products were obtained, which is the exact source of data in Study 2.1. The data was then analyzed using multilevel structural equation modeling (MSEM) to examine cross-level relationships between independent variables at the developer level (i.e., the development process of digital products) and the predictor variables at the individual level (i.e., customer-based developer image and individual download incidence). The results of Study 2.2 indicate that the innovation dimension (vitality) of developer image played an important role in encouraging customers’ download incidence, urging further investigation into the innovation management for developers in open innovation platforms. Thus, Study 3 was conducted from the perspective of an innovation portfolio.

Study 3 follows the results found in Study 2 by examining the question of how to prioritize the innovation portfolio to gain a more competitive advantage in open innovation platforms. There has been a corresponding surge of interest in understanding how developers can effectively formulate and execute innovation portfolios within digital ecosystems. Optimal distinctiveness theory emphasizes that developers need to balance competing pressures for conformity and differentiation with respect to competitors. Yet, extant optimal distinctiveness theory is rarely considered from the perspective of an innovation portfolio, which concerns the coherent association in the developer’s innovation portfolio. Conceptualizing the forces of different innovation portfolios allows us to evaluate how each innovation portfolio performs. Using an integrated theoretical model, we propose to examine, through optimal distinctiveness, how functional and experiential conformity affects the competitive advantage of products in innovation portfolios. We also examine our mechanisms from a contextual perspective by classifying categorical positions of innovation portfolios into two categories: positions in intra-category and positions in inter-category to explore the different contextual effects. Utilizing data collected from the same mobile application platform in the previous studies, we carried out data analysis using cubic polynomial regression and response surface analysis. Study 3 presents new theoretical insights into the non-linear interactions between function and experiential conformity, competitive advantage, and categorial positioning in intra-category and inter-category among products in innovation portfolios. Therefore, in an innovation portfolio context, the findings of Study 3 can provide some theoretical and practical implications for the innovation management of developers within open innovation platforms to resolve the innovation diffusion paradox.

The dissertation advances our understanding of the innovation diffusion paradox on open innovation platforms from a strategic management perspective, considering both comparing with competitors’ strategies and attracting customers’ attention. Considering the importance of comparing with competitors, this dissertation analyses the distinct characteristics of digital products and explores how developers can achieve greater diffusion by taking comparative proliferation strategies for digital products by utilizing a comparative lens with their competitors. With regard to gaining customers’ attention, this dissertation examines the role of developer image in the development process of digital products, incorporating the innovation dimension (developer vitality) into developer image from the customer's perspective. By focusing on innovation within open innovation platforms, this dissertation also further explains the tension between conformity and differentiation in innovation portfolios within open innovation platforms. Introducing innovation portfolios that consider the configuration among products furthers prior literature that has shifted the focus from an individual product perspective to a portfolio perspective to attain optimal distinctiveness.

Date of Award	22 Aug 2022
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Yugang YU (External Supervisor), Weiquan WANG (Supervisor) & Jingjun David XU (Supervisor)