Modularity, Industry Life Cycle and Open Innovationo

This paper discusses the incentives behind, and effects of open innovation in different stages of an industry life cycle. It argues that in the beginning of an industry life cycle, open innovation policies usually serve the dual purpose of exploring distant knowledge sources, and exploiting potential network effects to strengthen the installed base of a technology. In the later phases of the industry life cycle, after the emergence of a dominant design, open innovation incentives and effects depend largely on the product system architecture. Modularity at different parts of the product system is an important dimension which influences the types of open innovation strategies implemented by firms.