Cultivating ‘followers’ or ‘competitor’? - A study of innovation disclosure by technology leaders and their innovation ecosystem leadership
This study reveals a U-shaped relationship between technology leaders' innovation disclosure and their ecosystem leadership, demonstrating that while disclosure simultaneously cultivates followers and challenges competitors, factors like technological distance and government subsidies can mitigate this tension to optimize leadership outcomes.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
In the modern economy, the most successful companies rarely operate in isolation. Instead, they sit at the center of vast, living networks known as innovation ecosystems. These are not physical places but complex webs of relationships connecting a dominant "leader" company with a host of smaller partners, suppliers, and researchers who rely on the leader's technology. For the leader to thrive, it must guide this ecosystem, helping its partners grow while fending off rivals who want to take its place. This creates a difficult balancing act. If a leader shares too much of its secret knowledge, it risks teaching its competitors how to beat it. If it shares too little, its partners may feel left in the dark, lose trust, and fail to grow, leaving the leader without a strong network to support it. This tension between helping followers and fearing competitors is the central puzzle that researchers have set out to solve.
A team of researchers from Chongqing University of Posts and Telecommunications decided to investigate this dilemma by looking at real-world data from China's manufacturing sector. They focused on the country's leading technology companies, examining how much innovation information these firms chose to reveal to the public between 2016 and 2022. The researchers measured the companies' "innovation disclosure" by analyzing the language in their annual reports, counting how often they discussed research, patents, and new technologies. They then compared this level of openness against the companies' actual power and influence within their respective ecosystems, which they defined by how well the companies integrated their supply chains, led technological progress, and held a strong market position.
The study uncovered a surprising pattern that defies simple logic. The relationship between sharing information and holding power is not a straight line where more sharing always equals more power. Instead, it follows a U-shaped curve. When a technology leader first begins to share its innovation secrets, its power actually drops. In this early stage, the information is enough to help competitors catch up and challenge the leader's dominance, but it is not yet enough to deeply empower the followers to become loyal, capable partners. The leader finds itself in a weak spot, having given away advantages without yet reaping the benefits of a stronger network. However, as the leader continues to increase its disclosure, passing a specific threshold, the curve turns upward. Once the sharing becomes substantial and consistent, it stops helping competitors catch up and starts acting as a powerful tool to attract and train followers. At this high level of openness, the leader's influence grows significantly because the ecosystem becomes deeply dependent on its guidance, and the leader's reputation for transparency becomes a shield against rivals.
The researchers found that this turning point, where the strategy shifts from risky to rewarding, does not happen at the same time for every company. Two major factors can speed up this process. First, the gap in technology between the leader and the rest of the ecosystem matters. When a leader is vastly more advanced than its partners, sharing information has a different effect; the partners are so eager to learn that the leader reaches the point of strong leadership much faster. Second, government support plays a crucial role. When the government provides subsidies or financial backing to a leader, it signals to the ecosystem that the company is trustworthy and capable. This external validation helps the leader reach the "sweet spot" of influence sooner, as followers are more willing to trust and invest in the leader's vision when they see the government standing behind it.
The study also looked at a more subtle behavior: what happens when leaders try to exaggerate their achievements to look even better? The data suggests that some leaders do indeed boost their disclosure by overstating their innovations, a tactic that can temporarily make them look more powerful and attract more followers. However, this strategy comes with a hidden cost. When followers are misled by exaggerated claims, they often struggle to find the right path for their own development, leading to confusion and a loss of resilience. The research indicates that for this strategy to work without harming the ecosystem, the followers themselves need a strong internal culture of innovation. If the followers are sharp, well-staffed, and deeply engaged in their own research, they can see through the exaggeration, filter out the noise, and still benefit from the leader's genuine insights. Without this internal strength, the ecosystem becomes fragile, and the leader's short-term gain turns into a long-term weakness.
Ultimately, the paper paints a picture of innovation leadership as a delicate negotiation rather than a simple game of hide-and-seek. It suggests that the best path for a technology leader is not to hoard secrets or to reveal everything at once, but to find the right moment to open up fully. By pushing past the initial risk of helping competitors, leaders can build a robust network of partners who are too strong and too aligned to be easily replaced. The findings offer a clear roadmap for companies navigating this complex landscape: share enough to build trust and guide the ecosystem, but ensure that your partners are strong enough to handle the truth, and be wary of the temptation to overstate your success, as a healthy ecosystem depends on honest growth, not just a powerful image.
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