The concentration of innovative developers in the application software industry makes this fertile ground for the study of how innovation works. This research paper examines in close detail how the level and nature of innovation is affected by the economic mechanisms around it.
Software applications are becoming an increasingly important feature of daily life for both business and personal uses. As the use of mobile devices grows rapidly across all areas, apps are becoming increasingly integral to a wide variety of purposes.
The number of apps available across various platforms has exploded in recent years, as has the number of software developers producing apps for dissemination on these platforms. By 2010, the number of applications available on the Apple App Store alone had reached 300,000, with around 75,000 developers creating products for the store.
App development has thus become a central focus for innovation. The platform-based nature of the app model and the large number of developers concentrating in the one area makes this field particularly well suited to the study of how innovation works and how its nature and growth is affected by different variables.
The aim of this research paper is to gain an improved understanding of the economic mechanisms shaping app software innovation, particularly as the number of producers in the area grows. The usual presumption has been that a large pool of independent app software producers will generate a wide variety of software, a view that has led to the practice of encouraging large numbers of producers onto a single platform becoming a mainstay of computing and networking industries.
However, recent press coverage has suggested that the growing number of independent producers has produced a crowding-out effect that has made it increasingly difficult for developers to make money from their work. One successful developer was quoted recently as saying of the early days of app development for iPhone that “Back then there were about 1,000 apps, so it was much, much easier.” Today, he says, “You might make something very good, but it might not get noticed. It’s a lottery now.”
This paper sets out to discover how the growth in the number of producers affects the amount of innovation, the kind of innovation and the incentives for innovation among producers. The author, Kevin J Boudreau, Assistant Professor of Strategy and Entrepreneurship at London Business School, defines and describes how app software is generated, reviews the key properties of app development that should shape the economics of innovation in this area and develops empirical hypotheses based on these properties.
At the core of the paper is an empirical analysis of software applications built for mobile computers and PDAs over a specific five-year period. Each software title created by each producer for each of eight market-leading platforms, broken down by genre, over that period is observed, and then innovation patterns are studied. The resulting data enables the author to assess the effects of varying numbers of developers on the variety of apps being developed and the incentives for investment, as well as giving some indication of the variation generated by successive cohorts of entrants to the market.
The conclusions of this paper make valuable reading for all students of innovation and for those interested in the dynamics of the software application development industry. This is a new and rapidly changing field, and this paper includes ground-breaking work in analysing how it works and how this area of intense innovation is affected by the economic mechanisms around it.
Name of the full research paper: Let a Thousand Flowers Bloom? An Early Look at Large Numbers of Software 'Apps' Developers and Patterns of Innovation. This paper sets out to discover how the growth in the number of producers affects the amount of innovation, the kind of innovation and the incentives for innovation among producers.
Download the research paper here