Geoffrey Parker | Dartmouth College (original) (raw)

Papers by Geoffrey Parker

Production and Operations Management, Aug 1, 2019

Springer eBooks, Nov 24, 2021

Technology giants owe much of their success to fundamental improvements in the science and techno... more Technology giants owe much of their success to fundamental improvements in the science and technology of information and communications technology. However, complementary advancements were also necessary, and, much as firms had to learn to incorporate electricity in the last nineteenth and early twentieth centuries, we posit that the giant platforms have learned to harness the contributions of external actors in order to grow more rapidly than would otherwise have been possible. Thus, the drivers of the dramatic rise of the tech giant platform firm can be viewed as a business model innovation as well as a technical innovation. As orchestration business models become better understood, we expect that firms in non-platform sectors are increasingly likely to adapt practices that also allow them to participate in and benefit from external value creation. At the same time, we expect regulatory scrutiny to increase as the power and reach of technology giants increases and their influence is felt across the economy.

Many firms have moved from outsourcing only manufacturing and staff support activities (e.g., jan... more Many firms have moved from outsourcing only manufacturing and staff support activities (e.g., janitorial services) to outsourcing more complex and central activities such as product and process development. Outsourcing these more complex, nuanced, and time-sensitive activities increases the difficulties of coordinating with suppliers. We examine the frequency with which firms use various interorganizational integration mechanisms and project coordination tools to coordinate outsourced product development. We further examine the impact of these mechanisms and tools on project performance. We report descriptive and some preliminary regression statistics from the first three years of a four-year multi-firm, multi-industry research project. These preliminary results suggest that nearly all firms employ personnel dedicated to managing the outsourcing relationship. However, firms also use other integration modalities concomitantly. Specifically, firms initially rely on ad hoc face-to-face communication rather than co-location to manage the interface with outsourcing partners. However, over time, firms move to co-location to manage relationships with non-domestic suppliers. Surprisingly, firms make relatively little use of either sophisticated information technology or modular product designs. We find that the effects of a single integration mechanism or tool can vary dramatically across different outcomes. For example, co-locating employees appears to improve product quality but are associated with poor schedule peformance. Given the frequency with which firms employ dedicated individuals to manage the interface, we also present some preliminary evidence on the skills and training of these individuals; this evidence suggests that (1) they have received little formal training in key skills and that firms rely solely on experiential learning to train these individuals and (2) for the training they have received, whether they received in from their university training or from company-sponsored initiatives may have differential effects on project outcomes.

A practical guide to the new economy that is transforming the way we live, work, and play. Uber. ... more A practical guide to the new economy that is transforming the way we live, work, and play. Uber. Airbnb. Amazon. Apple. PayPal. All of these companies disrupted their markets when they launched. Today they are industry leaders. Whats the secret to their success? These cutting-edge businesses are built on platforms: two-sided markets that are revolutionizing the way we do business. Written by three of the most sought-after experts on platform businesses, Platform Revolution is the first authoritative, fact-based book on platform models. Whether platforms are connecting sellers and buyers, hosts and visitors, or drivers with people who need a ride, Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary reveal the what, how, and why of this revolution and provide the first owners manual for creating a successful platform business. Platform Revolution teaches newcomers how to start and run a successful platform business, explaining ways to identify prime markets and mone...

Proceedings of the 50th Hawaii International Conference on System Sciences (2017), 2017

The rapid introduction of Distributed Energy Resources (DER) into the retail/distribution sector ... more The rapid introduction of Distributed Energy Resources (DER) into the retail/distribution sector of the electric power system has raised questions concerning both the economics and control of the power system. This paper presents one market paradigm that builds upon extension of the logic of Locational Marginal Pricing into the distribution level arguing that this extension is necessary if there are to be competitive forces that bring new technologies to market while at the same time assuring the reliability of service. We introduce three concepts: first that there are only three core products (real power, reactive power and reserves) and that all other products are combinations of these; second that it is necessary to calculate Distributed Locational Marginal Prices (DLMP) in order to value any DER; and third that for there to be a market for DER it should be structured as an economic platform.

The Palgrave Encyclopedia of Strategic Management, 2018

This article discusses the importance of patent citations in outlining a 'paper trail' for the de... more This article discusses the importance of patent citations in outlining a 'paper trail' for the development of knowledge in a time of increasingly rapid technological development.

Social Science Research Network, 2021

Over the last years, several reports highlighted the market power of very large online platforms ... more Over the last years, several reports highlighted the market power of very large online platforms that are gatekeeping intermediaries between businesses and consumers, and the difficulty for classic competition policy tools to deal effectively with anti-competitive practices in these platforms. In response to this, the European Commission recently published a proposal for a Digital Markets Act (DMA) to complement existing competition policy tools by means of ex-ante obligations for platforms. This report presents an independent economic opinion on the DMA, from a high-level Panel of Economic Experts, established by the JRC and based on existing economic research and evidence. The Panel endorses the vision encapsulated in the DMA, including the designation of large gatekeeper platforms and a series of ex-ante obligations they should comply with. The Panel points out the challenge of striking a balance between the benefits from network effects of large platforms and the potential negat...

SSRN Electronic Journal, 2021

Digital platforms facilitate interactions between consumers and merchants that allow collection o... more Digital platforms facilitate interactions between consumers and merchants that allow collection of profiling information, which drives innovation and welfare. Private incentives, however, lead to information asymmetries resulting in market failures both on-platform, among merchants, and off-platform, among competing platforms. This paper develops two product-differentiation models to study private and social incentives to share information within and between platforms. We show that there is scope for ex-ante regulation of mandatory data sharing that improves social welfare better than competing interventions, such as barring entry, break-up, forced divestiture or limiting recommendation steering. These alternate proposals do not make efficient use of information. We argue that the location of data access matters and develop a regulatory framework that introduces a new data right for platform users, the in-situ data right, which is associated with positive welfare gains. By construction, this right enables effective sharing of information together with its context, without reducing the value created by network effects. It also enables regulatory oversight but limits data privacy leakages. We discuss crucial elements of its implementation in order to achieve innovation-friendly and competitive digital markets.

SSRN Electronic Journal, 2008

Platform-mediated networks encompass several distinct types of participants, including end users,... more Platform-mediated networks encompass several distinct types of participants, including end users, complementors, platform providers who facilitate users' access to complements, and sponsors who develop platform technologies. Each of these roles can be opened-that is, structured to encourage participation-or closed. This paper reviews factors that motivate decisions to open or close mature platforms. At the platform provider and sponsor levels, these decisions entail: 1) interoperating with established rival platforms; 2) licensing additional platform providers; or 3) broadening sponsorship. With respect to end users and complementors, decisions to open or close a mature platform involve: 1) backward compatibility with prior platform generations; 2) securing exclusive rights to certain complements; or 3) absorbing complements into the core platform. Over time, forces tend to push both proprietary and shared platforms toward hybrid governance models characterized by centralized control over platform technology (i.e., closed sponsorship) and shared responsibility for serving users (i.e., an open provider role).

SSRN Electronic Journal, 2020

Digital platforms are at the heart of online economic activity, connecting multi-sided markets of... more Digital platforms are at the heart of online economic activity, connecting multi-sided markets of producers and consumers of various goods and services. Their market power, in combination with their privileged ecosystem position, raises concerns that they may engage in anti-competitive practices that reduce innovation and consumer welfare. This paper deals with the role of market competition and regulation in addressing these concerns. Traditional (ex-post) antitrust intervention will be less effective in markets driven by network effects unless it is combined with a proper (ex-ante) regulatory framework. Antitrust tools should focus on value creation and its distribution before focusing on competition. The scope of regulatory intervention should satisfy the following three criteria: i) value creation from operation of the platforms does not decrease due to the policy intervention; in particular, interventions should not reduce network effects; ii) allocative efficiency is based on distributing the value created in a fair way among market participants e.g. use of the Shapley Value. Fair and transparent rules must govern the platform ecosystem; iii) dynamic efficiency and competition ensure that incentives for market misconduct and anticompetitive strategies such as artificial entry barriers are eliminated. Market interventions that target a firm's market power should ideally retain value creation while also encouraging small firm entry and innovation. Data has a central role in online markets. Value creation is reinforced through a recursive a data capture and data deployment feedback loop which is enabled by machine learning technologies. A regulatory intervention that facilitates data sharing mechanisms, such that data will not only confer value to market leaders but also to their competitors to the benefit of consumers, is crucial for creating more competitive and innovative digital markets.

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Proceedings of the 38th Annual Hawaii International Conference on System Sciences

Recent developments have challenged one prevailing interpretation of the idea that proprietary sy... more Recent developments have challenged one prevailing interpretation of the idea that proprietary systems, enshrined in copyright, create the greatest value. The challenge appears at one level among economic strategists who assert that the greatest value in information goods is not created by the strongest and most restrictive intellectual property protection and in another form by the proponents of Open Source Software who argue for value created by peer review and openly modifiable shared code. We articulate a balance of incentives as indexed by the length of time that software remains proprietary, and openness as indexed by the amount of the platform code base that an author releases to the developer community (and users) to promote the creation of new products. We analyze the trade-off between early and late release based on two novel approaches. The first is a two-sided network externality that explores how the release of free information benefits those who develop as well as those who consume. The second is a framing innovation that places existing licenses in a space that suggests where unexplored socially optimal licenses might exist. Neither technique requires the other and the contribution of each can stand on its own. The combination, however, offers the potential for advancement in a debate where many important trade-offs are often omitted to make analysis tractable.

Harvard Business Review, 2016

For decades, the five-forces model of competition has dominated the thinking about strategy. But ... more For decades, the five-forces model of competition has dominated the thinking about strategy. But it describes competition among traditional “pipeline” businesses, which succeed by optimizing the activities in their value chains—most of which they own or control. “Platform” businesses that bring together consumers and producers, as Uber, Alibaba, and Airbnb do, require a different approach to strategy. The critical asset of a platform is external—the community of members. The focus shifts from controlling resources to orchestrating them, and firms win by facilitating more external interactions and creating “network effects” that increase the value provided to all participants. In this new world, competition can emerge from seemingly unrelated industries and even from within the platform itself. The authors, three platform strategists, walk executives through the choices they must make when building platforms, outlining the different metrics needed to manage them. Businesses that fail...

Sustainability, 2017

Platform strategies, which highlight the interdependence in and evolution of business ecosystems,... more Platform strategies, which highlight the interdependence in and evolution of business ecosystems, are increasingly relevant for sustainable business models in the digital era. So far, platform research has existed as a fragmented body of insights from different fields, but an integrated theoretical perspective can lead to a more coherent understanding of the research overall. Organizational ambidexterity emphasizes the balance between exploration and exploitation, which is particularly conducive to understanding the sustainability of a firm. Using an organizational ambidexterity perspective, the authors analyze five platform strategies: pricing, openness, integration, differentiation, and envelopment. This paper provides a systematic review of the theoretical and empirical studies in leading management, economics, and information systems journals from 2000 to 2016. The findings show that platform strategies can help platform owners achieve ambidexterity by domain, temporal, and organizational separation. Finally, this paper proposes an agenda for future research.

SSRN Electronic Journal, 2010

Working papers are in draft form. This working paper is distributed for purposes of comment and d... more Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author.

We will explore how to value using modern financial techniques the development of new alternative... more We will explore how to value using modern financial techniques the development of new alternative energy technologies (AETs) given uncertainty. Uncertainty in developing AETs derives from: (1) the reduction in installation cost of new generation capacity as experience with the technology is gained, i.e. the learning curve (2) oil and natural gas price cycles; and (3) other macroeconomic and geopolitical forces, particularly the behavior of national oil companies (Aramco, PDVSA, PEMEX, etc.). Evaluating a new AET properly requires representing these uncertainties as well as an investment valuation approach that works well under high uncertainty. In particular, we propose to adapt the real options methodology to value the potential return from developing alternative energy technologies using stochastic system dynamics models representing the uncertainty in both the learning curve and the fossil fuel price cycles. The proposed algorithm to accomplish this valuation leverages the prior work on real options valuation in the decision analysis literature.

This paper introduces and develops a new model of platform growth, inspired by the standard growt... more This paper introduces and develops a new model of platform growth, inspired by the standard growth literature. At each moment in continuous time, the platform owner must choose (i) how much source code to open and make available to a developer community, (ii) how fast to absorb developer code into the platform, (iii) how much to tax developer output, and (iv) how much to invest in the platform itself. Without any public code, the control problem reduces to the growth model of Solow (1956). Our platform model captures an infinitely recursive R&D ecosystem with innovation spillovers across developers. To optimize growth, the platform owner must internalize this recursive externality. Developers also innovate less the sooner they lose their code, but the platform grows faster with earlier code expropriation. The platform thus willingly privately contributes to the collective public good of open source code, as part of a dynamic profit-maximizing strategy to encourage taxable innovation...

Many important risky projects are characterized by stochastic processes embedded in non-linear, f... more Many important risky projects are characterized by stochastic processes embedded in non-linear, feedback structures with delays. System dynamics models may be used to estimate the cash flow resulting from these projects. If these projects include managerial flexibility (real options), a correct financial evaluation of these cash flow requires the use of real options methodology. We adapt prior work on real options valuation in the decision analysis literature to develop a methodology that avoids the need to estimate a risk-adjusted discount rate for the project with options. We illustrate this approach with a model drawn from the wind power industry, which is characterized by numerous uncertainties and high managerial flexibility. We conclude with a discussion comparing this methodology to the previous methods and describe under what conditions each one might be a more appropriate choice.

SSRN Electronic Journal, 2016

For a period starting in 2015, Apple, Google, and Microsoft became the most valuable companies in... more For a period starting in 2015, Apple, Google, and Microsoft became the most valuable companies in the world. Each was marked by an external developer ecosystem. Anecdotally, at least, developers matter. Using a formal model of code spillovers, we show how a rising number of developers can invert the firm. That is, firms will choose to innovate using open external contracts in preference to closed vertical integration. The locus of value creation moves from inside the firm to outside. Distinct from physical goods, digital goods afford firms the chance to optimize spillovers. Further, firms that pursue high risk innovations with more developers can be more profitable than firms that pursue low risk innovations with fewer developers. More developers give platform firms more chances at success. Our contribution is to show why developers might cause a shift in organizational form and to provide a theory of how platform firms optimize their own intellectual property regimes in order to maximize growth. We use stylized facts from multiple platform firms to illustrate our theory and results.