KEVIN BOUDREAU

Assistant Professor, Strategy

(PhD MIT)

LONDON BUSINESS SCHOOL

I am an applied microeconomist and strategy scholar doing empirical research at the intersection of innovation, competition and organization. Here is my resume.

I have a PhD from MIT, an MA in Economics from the University of Toronto and a BASc in Engineering from the University of Waterloo. I have taught courses in Business Strategy, Innovation, Dynamic Strategies and New Ventures, and in Empirical Methods and Econometrics.

UPCOMING PRESENTATIONS

Academy of Management, Platform Dynamics

CRES Conference on the Foundations of Business Strategy, Olin

Darden Entrepreneurship & Innovation Conference

NESTA Open Innovation Research Roundtable

BACKGROUND

I have a special interest in managing and orchestrating large “ecosystems” of firms and individuals who work together to build products and services, with multiple elements or contributions to make up the final working system.

Most of my research either relates directly to 1) the strategies that “orchestrator” firms should implement (in terms of contracting, technology design, rule-setting, partnerships, etc.); or 2) the special sorts of industrial and competitive dynamics that form around and between ecosystems, which orchestrator firms must have in mind to properly guide their strategies.

This perspective has implications for a number of contexts. I am particularly interested in those where technical change, innovation and creative development play a central role, such as: open source organization and production; video game development (console, mobile and on-line), modding and commercial platform strategy; web & media portals, publishing, television networks and content development and sourcing; large-scale engineering projects such as automotive design, aerospace and defense; life science platforms, genomics; health care services; fashion. In my work, I have looked at range of approaches to organizing large ecosystems, ranging from highly competitive to cooperative regimes.

While many of these systems would at first seem distinct and unorthodox, I tend to find they can be readily framed and interpreted as extensions of more general principles we have learned from industrial and organizational and contract economics and a long tradition of research on the economics of science, research and innovation.

Prior to academics, I was a director of research and consulting at the Economist Intelligence Unit focusing on communications and media industries in Western Europe and North America. In an earlier position I was program leader for M&A and large-scale infrastructure contracting projects at Qualcomm Inc, working mostly in Latin America. At Braxton Associates, I supported the Canadian practice as a business analyst, consulting to media and telecoms companies and their investors in North and South America. In engineering school I interned at the Canadian Space Agency working on the Canadarm robotic arm for the international space station and researched heat transfer problems for Nortel Networks. My research continues to be bring me into close contact with companies and organizations in an advisory role.

RESEARCH

My work most often involves the analysis of large-scale data sets, including both naturally-occurring data and field-experiments.

Dissertation: How Open Should an Open System Be? : Essays on Mobile Computing

““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.

Opening the Platform vs. Opening the Complementary Good? The Effect on Product Innovation in Handheld Computing

(conditional acceptance, Management Science)

Some open strategies involve giving up control over a core technology platform. Others involve encouraging independent contributors to develop mix-and-matchable components. While these approaches often go hand-in-hand, here I argue they should relate to different objectives, instruments and economic mechanisms. This paper presents evidence on how opening the platform and complementary development related to development rates in a panel data set on handheld computing systems (1990-2004). The analysis shows that the relationship qualitatively differed depending on the approach to openness that was pursued. The central econometric concern is to purge estimates of several possible sources of endogeneity bias. While in principle opening may produce either an increase or decrease in innovation, in this context opening complementary development positively related to device development rates. It resulting in up to five-times acceleration of development rates. Open licensing of complementors had the greatest effect, with intermediate liberalness of licensing associated with fastest rates. Sharing technology with complementors led to small, incremental effects above and beyond this. Reducing control held by the platform owner or allowing outsiders to contribute to platform development related to much smaller, mostly insignificant effects (on the order of 10-20%).

Competition and Modular Innovation: Evidence from an “App Store” on Variety and Quality

(R&R, Organization Science)

We now have considerable theory to suggest there are benefits of having large numbers of suppliers innovating in markets for modular components. In this article, I empirically study how adding suppliers affected variety and quality in a quintessential example, the thousands of third-party applications software developers in handheld computing (1999-2004). I estimate causal effects by exploiting changes in the labor market for software developers. I find that adding suppliers increased the number of varieties available. At the same time, adding suppliers had a net effect of slowing down the advance of quality, in terms of the release of new versions. This retarding effect might have been worthwhile had added suppliers contributed useful hit products, at least once in a while. But, successive cohorts released less compelling products on average, while also generating less variation than earlier-entering cohorts. I use these results to better understand how precisely innovation works in cases of modular components, and how it may sometimes function differently from that in more traditional industries

How to Manage Outside Innovation: “Communities” or “Markets” of External Innovators? with K. Lakhani (Harvard)
Sloan Management Review 2009

Of course, the fundamental concept of “open innovation” -- in the sense of relying on outsiders both as a source of ideas and as a means to commercialize them -- is hardly new, but companies have struggled with precisely how to open up their product development to the external world. For starters, many executives have little idea how to motivate and manage outside innovation. Specifically, should external innovators be organized as a collaborative community or as a competitive market? From our research, we have identified three critical issues that managers should take into account when making that decision. Specifically, the discussion must look at: 1) the type of innovation that will be shifted to external innovators, 2) the motivations of those individuals and 3) the nature of the platform business model.

Platform Rules: Multi-Sided Platforms as Regulators, with A. Hagiu (Harvard)

in Gawer, A. (ed) (2009), Platforms, Markets and Innovation, Cheltenham, UK and Northampton, MA, US: Edward Elgar.

This paper provides a basic conceptual framework for interpreting non-price instruments used by multi-sided platforms (MSPs) by analogizing MSPs as "private regulators" who regulate access to and interactions around the platform. We present evidence on Facebook, TopCoder, Roppongi Hills and Harvard to document the "regulatory" role played by MSPs. We find MSPs use nuanced combinations of legal, technological, informational and other instruments (including price-setting) to implement desired outcomes. Non-price instruments were very much at the core of MSP strategies.

Racing and Searching in Innovation Contests: An Empirical Analysis with K. Lakhani (Harvard) and N. Lacetera (CWRU)
(R&R Management Science)

A central concern in designing innovation contests is the number of competing solvers that should be admitted. We show that traditional concerns about diminished incentives with large numbers of contest participants may be over-stated, at least when innovation involves uncertain search. Using a unique data set on the solution of 645 software coding contests over a six year period, we find that adding solvers to a contest activates two sets of mechanisms, (1) a negative incentive or racing effect, whereby greater rivalry reduces the effort expended by individual solvers, and (2) a parallel search effect whereby a greater number of solvers advances innovation by broadening the search for solutions. We show that the former effect dominates for less uncertain problems, the latter effect for more uncertain problems. Our findings emphasize the importance of problem type when designing innovation contests and open innovation systems.

Governing the Creatives: Field Experimental Evidence on the Role of Worker Sorting in Driving Innovative Performance with K. Lakhani (Harvard)

In this paper we present novel field experimental evidence to show that individuals have different preferences for cooperative and competitive institutions for innovation---and these preferences have large, economically significant performance, implications. In the experiment, individuals could choose between a competitive and a cooperative regime to solve computational-engineering problem faced by NASA’s Space Life Sciences Directorate. The experiment mimicked “open innovation” institutional regimes where individuals can participate in either competitive or cooperative problem solving with both pecuniary and non-pecuniary reward structures. Here we compare the performance of individuals who chose to be in the competitive regime versus those that were assigned to the regime, controlling for their skill level. First we find that those who were given the choice of institutional regime performed significantly better and exerted more effort than those that were assigned to compete. Second we find that the presence of pecuniary rewards resulted in better performance and more effort. Third we find that the impact of choice on performance and effort is equivalent to- and sometimes greater than the impact of pecuniary rewards, showing the importance of to selection and sorting for innovation.

Complimentary Complements? Two-Sided Markets with Free Goods and Suppliers who Don't get Paid with Lars Bo Jeppessen (CBS)

Field Experiments in Open Innovation Software Development for National Bureau of Economic Research (NBER) 50th anniversary of The Rate and Direction of Inventive Activity

TOPICAL INTERESTS

Platforms, two-sided markets, multi-component technical systems, “ecosystems” of innovating firms

Open, distributed and user innovation

Governance and organization of innovation

Technology and platform licensing, technology franchises, vertical relationships and controls

Firm heterogeneity, competition and innovation

Industrial organization, competition and productivity

DISCIPLINARY ORIENTATION

Strategic management

Economics of innovation, technical change and research

Organizational economics

Industrial organization