Performance Consequences of Selective Revealing: Insights from a Simulation Approach

How do the adoption of selective revealing strategies and the consequential diffusion of knowledge affect an industry’s innovativeness? Under what circumstances is the adoption of this strategy profitable—for the focal... [ view full abstract ]

How do the adoption of selective revealing strategies and the consequential diffusion of knowledge affect an industry’s innovativeness? Under what circumstances is the adoption of this strategy profitable—for the focal firm, for followers, or for rivals? While selective revealing may have well understood competitive benefits, it may also foster a homogenization of knowledge production that decreases the value of future innovation. Also, rivals may be positioned better to benefit from the spillovers they received. To understand which of these effects dominates under which circumstances, we rely on simulations based on an NK-model. We find the better imitators are able to copy as well as predict the downstream performance effects of adopting revealed knowledge, the more likely they are to outperform the revealing firm. However, we also identify scenarios in which revealing has a strictly positive effect. These insights support previous theoretical arguments that selective revealing can help firms to dominate technological development paths to their benefit. We further show how the contribution by volunteer communities (or “crowds”) that dedicate their creative power to the improvement of the revealing firms’ products/services are key to any benefit of selective revealing.