Economic Value Creation in Mobile Applications

Timothy F. Bresnahan, Jason P. Davis, Pai-Ling Yin

Chapter in NBER book The Changing Frontier: Rethinking Science and Innovation Policy (2015), Adam Jaffe and Benjamin Jones, editors (p. 233 - 286)
Conference held August 2-3, 2013
Published in July 2015 by University of Chicago Press
© 2015 by the National Bureau of Economic Research

New mobile development platforms are a 21st-century growth pole. By successfully recombining existing information technologies with new innovations, they have spurred a positive feedback loop of consumer adoption of mobile devices and firm entry into a wide variety of applications, or "apps." Despite its tremendous size, the industry is still at an early stage, with rapid growth and a wide variety of economic experiments exploring how this new industry will create economic value. Because there are numerous and growing app markets, the industry needs economic institutions to support market experimentation. However, the volume and diversity of app product entry has created problems for marketing and commercialization, especially matching consumers to products.

This early pattern is like many earlier information and communications technology industries in that it shows a pattern of technical success but commercialization struggles. However, several important new issues arise, including a bias against entrepreneurial commercialization, and the importance of end-user demand in determining market evolution. We consider how this situation has impacted the industry's task of discovering economic value and choosing among different app and platform features to make its ultimate contribution to economic growth. We also consider the likely market and institutional responses to the current bottleneck.

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This paper was revised on July 23, 2014

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