The Microdynamics of Resource
Partitioning: Technological Licensing in
the Security Software Industry
Andrea Fosfuri, Marco S. Giarratana
& Szabolcs S. Sebrek
Universidad Carlos III de Madrid
SIAF – International School for Advanced Education
June 12-16, 2006
Volterra (Pisa), Italy
Introduction
„
The emergence and importance of market for
technologies (Arora et al., 2001)
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„
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Affect technology related strategies of both suppliers
and users
Small and young firms: focus on developing
technologies instead of commercialization
(Gans&Stern, 2003)
Licensing agreements as key mechanisms (Anand
& Khanna, 2000)
„
The strength of IPR system
Research question
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An interesting aspect of technology trade
„
„
„
how licensing strategies interact with a firm’s product
strategies?
whether and how the firm role in the market for
technology (as a buyer or as a seller) conditions the
choice of different positions in the product market?
Following the resource partitioning approach that
distinguishes between specialist and generalist
organizations
„
two different product strategies will be examined:
• Versioning and
• portfolio broadening
The Industry Background
Security Software Industry
„ New segment of the Software Industry
„ Started in 1989, with a knowledge base from the
1970s
„ World market of $10b in 2002
„ Highly turbulent sector
„
„
„
„
„
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An example of a Schumpeterian environment
Technology-based industry
Important level of entry and exit
Entry and exit barriers + scale economies Æ LOW
Dominated by start-ups
Exhibits an active market for technology
The Previous Findings
„
Schumpeterian environments
„
„
product innovation with crucial role
consumers’ expectations constantly shift
» organizational learning -March (1991)
„ customers, competitors and market
„ Exploration: essential intraorganizational learning
„ Exploitation: external sources of technological
knowledge
The Previous Findings
„
Given Resource Partitioning approach
(Carroll, 1985; Kim et al., 2003)
„
Versioning strategy: release frequently new product or updates of existing one in a specific niche
„
Portfolio strategy: competition in a variety of domains
simultaneously
Hypothesis 1
„
Aspects of versioning / specialist strategy
„
„
„
„
Low entry barriers Æ keep core products always updated and at the
technological frontier
Economies of learning-by-doing + consumers’ feedbacks
Specialists: focusing on innovation Æ”state of the art technology”
Versioning strategy has its own cost: cannibalization among
product generations
„
„
Remedy: recup the investment by selling the technologies on the
market
Avoiding new competitors Æ Distant resource space
H1: In a resource partitioned enviroment, a specialist
strategy is favored by selling the disembodied
technology in the market for technology.
Hypothesis 2
„
Aspects of diversification /generalist strategy: broad package of
products to costumers entering multiple niches
„ Product variety strongly affects the probability of a firm’s survival
(Sorenson, 2000)
„
„
Moreover, shorter product life-cycles + more and more
complex products
But to perform a generalist strategy firms need diverse
capabilities
„
Scan the environment for technology acquisition purposes
H2: In a resource partitioned enviroment, a generalist
strategy is favored by buying disemboded technologies
in the market for technology.
The Sample
„
„
„
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540 entrants from 1989-2003
Data on product product versioning and portfolio
broadening
Standard controls added
Two most important covariates are
„
„
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Technology sale and
aquisition
Logit model to test the probability of making a
new version/new niche penetration
Variables
Dependent variables
„
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Specialist strategy. This time variant variable
(Specialist) is equal to 1 if the firm releases a new
version of the entry product, i.e. the product that
has spurred a firm’s entry in the SSI. The variable is
calculated for each year of a firm’s permanence in
the market.
Generalist strategy. This variable (Generalist) is
again time variant and is equal to 1 if the firm
releases a product in a new niche, viz. a niche where
the firm is not competing up to that date.
Variables
Independent variables
„
„
Seller. This variable (Seller) captures a firm’s
presence in the market for technologies as a seller.
To this end, this time variant variable is equal to the
cumulative number of contracts signed by a firm as
seller of technology in SSI.
Acquirer. This variable (Acquirer) measures a firm’s
presence in the market for technologies as a buyer. It
is again time variant and equal to the cumulative
number of contracts signed by a firm as buyer of
technology in SSI.
Results
Table 1. Logit model on the probability to perform a Specialist and a Generalist product strategy
Specialist
Generalist
Beta
St.Err.
Beta
St.Err.
Seller
1.85**
0.57
-0.75
0.51
Buyer
0.45
1.45
3.75**
0.99
Entry Patent
4.43**
1.18
2.45**
1.07
Entry Trademark
-0.05
0.04
0.01
0.05
Employees
0.56
0.81
0.87
1.09
US Firm
0.2
0.67
0.3
0.63
Age in the Market
-1.19
0.67
1.68*
0.76
Density delay
0.03
1.31
4.56**
0.75
LogL
-928.44
-927.23
Conclusions
„
the correct functioning of the market for
technology is pivotal to realize the resource
partitioning dynamics
„
the surviving organizations split in niche specialists and
generalists
specialist strategy: an aggressive product
versioning in the niche that spurred the firm entry
„ generalist strategy: releasing product in different
niches of the market
» buyer and seller position in the market for
technology
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Thank you for the attention!
Complementary material
Research setting
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Our population sample is composed by all firms that
have introduced at least one product in the SSI.
Product introduction and technology transfer data
were taken from Infotrac’s General Business File
ASAP and PROMT database (former Predicast)
Large set of trade journals, magazines and other
specialized press: reports several categories of events
We searched for all press articles that reported a
“Product announcement”, a “New software release”
and a “Software evaluation” in SSI (SIC Code 73726)
from 1980 to 2003.
Product niches in SSI
Authentication digital signature
„ Anti-virus
„ Data storage protection
„ Firewalls
„ Network software security
„ Virtual private network access
„
World market leaders in SSI
Network Ass.
„ Symantec
„ RSA Data Sec.
„ Check Point
„ Rainbow Tech.
„ Trend Micro
„ Verisign
„ Aladdin
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