Strategic interaction between IoT technology openness and adoption considering potential firm entry

Internet of Things (IoT) technological firms have the potential to enter new product domains, which poses a significant impact on both themselves and established incumbents. This study investigates whether an IoT technological firm (entrant) enters a new product area. If so, does the entrant make its technology available and do the incumbents adopt this technology? We develop game-theoretical models in three scenarios: the base scenario with only an incumbent, the competitive scenario where an incumbent and an entrant compete, and the co-opetitive scenario where an incumbent and an entrant form a co-opetition relationship. Our results suggest that an IoT technological firm enters a new product area only when the IoT functionality embedding cost falls within a certain range. The entrant shares its technology when the payment rate is not particularly low. The lower the product substitution rate and/or the higher the IoT functionality embedding cost, the more willing the entrant is to share. The incumbent adopts the entrant’s IoT technology only when the payment rate is not too high and is more reluctant to adopt the technology as the IoT functionality embedding cost goes up. Furthermore, we consider an extension where the IoT technological firm enters multiple product areas simultaneously. We find that the entrant is always willing to enter more product areas. And the more product areas the entrant enters, the more eager the incumbents are to use the entrant’s technology.