Feng Zhu

Assistant Professor of Business Administration

Unit: Technology and Operations Management

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(617) 496-6979

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Feng Zhu is an assistant professor of business administration in the Technology and Operations Management Unit and teaches its course in the MBA required curriculum. Before joining the HBS faculty, he was an assistant professor of strategy at the University of Southern California. 

In his research, Professor Zhu examines competitive strategy and innovation in high-technology industries, with an emphasis on platform-based markets. He has studied a wide range of platforms, such as video game consoles, social-networking sites, Craigslist, Wikipedia, smartphone operating systems, blogs, newspapers, and ad-sponsored free products. 

Professor Zhu’s work has appeared in journals including the American Economic ReviewManagement Science, and Strategic Management Journal. It has been covered by such media as the Washington Post, the Financial Times, the Wall Street Journal, and Forbes.com and has most recently won the Strategic Management Society’s Best Paper Award for Practice Implications. He received the Past Chairs’ Emerging Scholar Award from the Technology and Innovation Management Division of the Academy of Management and the Ascendant Scholar Award from the Western Academy of Management.  

Professor Zhu earned his Ph.D. in science, technology and management and a master’s in computer science at Harvard University. He did his undergraduate work in computer science, economics, and mathematics at Williams College.

Publications

Journal Articles

  1. Cannibalization and Option Value Effects of Secondary Markets: Evidence from the U.S. Concert Industry

    We examine how reducing search frictions in secondary markets affects the value appropriated by firms in primary markets. We characterize two effects on primary market firms caused by intermediaries entering secondary markets: the "cannibalization" and "option value" effects. Separation between primary and secondary markets can drive which of the two effects dominates. Firms selling valuable and scarce products are more likely to have separate primary and secondary markets and will therefore appropriate more value when secondary markets thicken. Firms selling products that are not valuable and scarce will be hurt. Further, we hypothesize that firms have incentives to engineer scarcity by limiting supply when secondary markets thicken to separate primary and secondary markets. We find support for these hypotheses in the U.S. concert ticket industry.

    Keywords: cannibalization effect; option value effect; secondary markets; concert industry; Craigslist; Competition; Distribution Channels; Entertainment and Recreation Industry;

    Citation:

    Bennett, Victor Manuel, Robert Seamans, and Feng Zhu. "Cannibalization and Option Value Effects of Secondary Markets: Evidence from the U.S. Concert Industry." Strategic Management Journal (forthcoming). View Details
  2. Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers

    How do firms respond to entry in multi-sided markets? We address this question by studying the impact of Craigslist, a website providing classified-advertising services, on local U.S. newspapers. We exploit temporal and geographical variation in Craigslist's entry to show that newspapers with greater reliance on classified-ad revenue experience a larger drop in classified-ad rates after Craigslist's entry. The impact of Craigslist's entry on the classified-ad side appears to propagate to other sides of the newspapers' market. On the subscriber side, these newspapers experience an increase in subscription prices, a decrease in circulation, and an increase in differentiation from each other. On the display-ad side, affected newspapers experience a decrease in display-ad rates. We also find evidence that affected newspapers are less likely to make their content available online. Finally, we estimate that Craigslist's entry leads to $5 billion in year 2000 dollars in savings to classified-ad buyers during 2000–2007.

    Keywords: Multi-Sided Platforms; Market Entry and Exit; Web Sites; Newspapers; Advertising; Advertising Industry; Journalism and News Industry;

    Citation:

    Seamans, Robert, and Feng Zhu. "Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers." Management Science 60, no. 2 (February 2014): 476–493. View Details
  3. Ad Revenue and Content Commercialization: Evidence from Blogs

    Many scholars argue that when incentivized by ad revenue, content providers are more likely to tailor their content to attract "eyeballs," and as a result, popular content may be excessively supplied. We empirically test this prediction by taking advantage of the launch of an ad-revenue-sharing program initiated by a major Chinese portal site in September 2007. Participating bloggers allow the site to run ads on their blogs and receive 50% of the revenue generated by these ads. After analyzing 4.4 million blog posts, we find that, relative to nonparticipants, popular content increases by about 13 percentage points on participants' blogs after the program takes effect. About 50% of this increase can be attributed to topics shifting toward three domains: the stock market, salacious content, and celebrities. Meanwhile, relative to nonparticipants, participants' content quality increases after the program takes effect. We also find that the program effects are more pronounced for participants with moderately popular blogs and seem to persist after participants enroll in the program.

    Keywords: ad-sponsored business models; media content; blog; revenue sharing; user-generated content; platform-based markets; Blogs; Business Model; Market Platforms; Commercialization; Online Advertising;

    Citation:

    Sun, Monic, and Feng Zhu. "Ad Revenue and Content Commercialization: Evidence from Blogs." Management Science 59, no. 10 (October 2013): 2314–2331. View Details
  4. Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models

    This paper provides the first formal model of business model innovation. Our analysis focuses on sponsor-based business model innovations where a firm monetizes its product through sponsors rather than setting prices to its customer base. We analyze strategic interactions between an innovative entrant and an incumbent where the incumbent may imitate the entrant's business model innovation once it is revealed. The results suggest that an entrant needs to strategically choose whether to reveal its innovation by competing through the new business model or conceal it by adopting a traditional business model. We also show that the value of business model innovation may be so substantial that an incumbent may prefer to compete in a duopoly rather than to remain a monopolist.

    Keywords: business model innovation; imitation; sponsor-based business model; strategic revelation; strategic concealment; Business Model; Innovation and Invention; Price; Competitive Strategy; Adoption; Value; Duopoly and Oligopoly; Product; Customers; Market Entry and Exit; Monopoly;

    Citation:

    Casadesus-Masanell, Ramon, and Feng Zhu. "Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models." Strategic Management Journal 34, no. 4 (April 2013): 464–482. View Details
  5. Entry into Platform-based Markets

    This paper examines the relative importance of platform quality, indirect network effects, and consumer expectations on the success of entrants in platform-based markets. We develop a theoretical model and find that an entrant's success depends on the strength of indirect network effects and on the consumers' discount factor for future applications. We then illustrate the model's applicability by examining Xbox's entry into the video game industry. We find that Xbox had a small quality advantage over the incumbent, PlayStation 2, and the strength of indirect network effects and the consumers' discount factor, while statistically significant, fall in the region where PlayStation's position is unsustainable.

    Keywords: platform-based markets; winnter-take-all; first-mover advantage; indirect network effects; video game industry; Quality; Network Effects; Market Entry and Exit; Technology Platform; Motion Pictures and Video Industry;

    Citation:

    Zhu, Feng, and Marco Iansiti. "Entry into Platform-based Markets." Strategic Management Journal vol. 33, no. 1 (January 2012): 88–106. View Details
  6. Group Size and Incentives to Contribute: A Natural Experiment at Chinese Wikipedia

    In this paper, we examine the causal relationship between group size and incentives to contribute in the setting of Chinese Wikipedia, the Chinese language version of an online encyclopedia that relies entirely on voluntary contributions. The group at Chinese Wikipedia is composed of Chinese-speaking people in mainland China, Taiwan, Hong Kong, Singapore, and other regions in the world, who are aware of Chinese Wikipedia and have access to it. Our identification hinges on the exogenous reduction in group size at Chinese Wikipedia as a result of the block of Chinese Wikipedia in mainland China in October 2005. During the block, mainland Chinese could not use or contribute to Chinese Wikipedia, although contributors outside mainland China could continue to do so. We find that contribution levels of these nonblocked contributors decrease by 42.8 percent on average as a result of the block. We attribute the cause to social effects: contributors receive social benefits from their contributions, and the shrinking group size reduces these social benefits. Consistent with our explanation, we find that the more contributors value social benefits, the greater the reduction in their contributions after the block.

    Keywords: Rights; Motivation and Incentives; Internet; Valuation; Groups and Teams; Knowledge Sharing; Behavior; Satisfaction; Size; Government and Politics; Economics; Information Technology Industry; Hong Kong; Taiwan; Singapore;

    Citation:

    Zhang, Michael, and Feng Zhu. "Group Size and Incentives to Contribute: A Natural Experiment at Chinese Wikipedia." American Economic Review 101, no. 4 (June 2011): 1601–1615. View Details
  7. Strategies to Fight Ad-sponsored Rivals

    We analyze the optimal strategy of a high-quality incumbent that faces a low-quality ad-sponsored competitor. In addition to competing through adjustments of tactical variables such as price or the number of ads a product carries, we allow the incumbent to consider changes in its business model. We consider four alternative business models, a subscription-based model, an ad-sponsored model, a mixed model in which the incumbent offers a product that is both subscription-based and ad-sponsored, and a dual model in which the incumbent offers two products, one based on the ad-sponsored model and the other based on the mixed-business model. We show that the optimal response to an ad-sponsored rival often entails business model reconfigurations. We also find that when there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through the subscription-based or the ad-sponsored model, rather than the mixed or the dual model, because of cannibalization and endogenous vertical differentiation concerns. We discuss how our study helps improve our understanding of notions of strategy, business model, and tactics in the field of strategy.

    Keywords: strategy; business models; tactics; advertising; pricing; Business Model; Advertising; Competition; Quality; Price; Product Marketing;

    Citation:

    Casadesus-Masanell, Ramon, and Feng Zhu. "Strategies to Fight Ad-sponsored Rivals." Management Science 56, no. 9 (September 2010): 1484–1499. View Details
  8. Impact of Online Consumer Reviews on Sales: The Moderating Role of Product and Consumer Characteristics

    This article examines how product and consumer characteristics moderate the influence of online consumer reviews on product sales using data from the video game industry. The findings indicate that online reviews are more influential for less popular games and games whose players have greater Internet experience. The article shows differential impact of consumer reviews across products in the same product category and suggests that firms' online marketing strategies should be contingent on product and consumer characteristics. The authors discuss the implications of these results in light of the increased share of niche products in recent years.

    Keywords: internet marketing; online consumer reviews; word of mouth; video game industry; long tail; Online Technology; Marketing Reference Programs; Video Game Industry;

    Citation:

    Zhu, Feng, and Michael Zhang. "Impact of Online Consumer Reviews on Sales: The Moderating Role of Product and Consumer Characteristics." Journal of Marketing 74, no. 2 (March 2010): 133–148. View Details
  9. What Is the Impact of Software Patent Shifts? Evidence from Lotus v. Borland

    Economists have debated the extent to which strengthening patent protection spurs or detracts from technological innovation. This paper examines the reduction of software copyright protection in the Lotus v. Borland decision. If patent and copyright protections are substitutes, weakening of one form should be associated with an increased reliance on the other. We find that the firms affected by the diminution of copyright protection disproportionately accelerated their patenting in subsequent years. But little evidence can be found for any harmful effects on firms' performance and incentive to innovate: in fact, the increased reliance on patents is correlated with growth in measures such as sales and R&D expenditures.

    Keywords: Software; Patents; Technology; Information Technology Industry;

    Citation:

    Lerner, Josh, and Feng Zhu. "What Is the Impact of Software Patent Shifts? Evidence from Lotus v. Borland." International Journal of Industrial Organization 25, no. 3 (June 2007): 511–529. (Earlier version distributed as National Bureau of Economic Research Working Paper No. 11168.) View Details

Working Papers

  1. Do Experts or Collective Intelligence Write with More Bias? Evidence from Encyclopædia Britannica and Wikipedia

    Which source of information contains greater bias and slant—text written by an expert or that constructed via collective intelligence? Do the costs of acquiring, storing, displaying and revising information shape those differences? We evaluate these questions empirically by examining slanted and biased phrases in content on US political issues from two sources—Encyclopædia Britannica and Wikipedia. Our overall slant measure is less (more) than zero when an article leans towards Democrat (Republican) viewpoints, while bias is the absolute value of the slant. Using a matched sample of pairs of articles from Britannica and Wikipedia, we show that, overall, Wikipedia articles are more slanted towards Democrat than Britannica articles, as well as more biased. Slanted Wikipedia articles tend to become less biased than Britannica articles on the same topic as they become substantially revised, and the bias on a per word basis hardly differs between the sources. These results have implications for the segregation of readers in online sources and the allocation of editorial resources in online sources using collective intelligence.

    Keywords: Information; Prejudice and Bias; Online Technology;

    Citation:

    Greenstein, Shane, and Feng Zhu. "Do Experts or Collective Intelligence Write with More Bias? Evidence from Encyclopædia Britannica and Wikipedia." Harvard Business School Working Paper, No. 15-023, October 2014. View Details
  2. The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Market

    We examine how patent wars affect firm strategy. We hypothesize that, as patent wars intensify, firms shift their business foci to markets with weak intellectual property (IP) protection due to increased litigation risks. This shift is attenuated for firms with stronger technological capabilities and is more pronounced for firms whose home markets have weak IP systems. Using data from the global smartphone market, we find support for these hypotheses. Interestingly, we also find that the patent war intended to hamper the growth of the Android platform may have merely shifted the sales to weak IP countries. This study sheds light on the emerging patent enforcement strategy literature by highlighting the heterogeneity in the efficacy of national patent systems in explaining firm strategy in platform-based markets.

    Keywords: patent litigation; intellectual property; platform-based markets; smartphone; institutional heterogeneity; Technology Platform; Patents; Lawsuits and Litigation; Globalized Markets and Industries; Business Strategy; Telecommunications Industry;

    Citation:

    Paik, Yongwook, and Feng Zhu. "The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Market." Harvard Business School Working Paper, No. 14-015, August 2013. View Details
  3. Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models

    We study sponsor-based business model innovations where a firm monetizes its product through sponsors rather than setting prices to its customer base. We analyze strategic interactions between an innovative entrant and an incumbent where the incumbent may imitate the entrant's business model innovation once it is revealed. We find that an entrant needs to strategically choose whether to reveal its innovation by competing through the new business model, or conceal it by adopting a traditional business model. We show that the value of business model innovation may be so substantial that an incumbent may prefer to compete in a duopoly rather than to remain a monopolist.

    Keywords: Business Model; Innovation and Invention; Market Entry and Exit; Competitive Strategy; Competitive Advantage; Value;

    Citation:

    Casadesus-Masanell, Ramon, and Feng Zhu. "Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models." Harvard Business School Working Paper, No. 11-003, July 2010. (Revised September 2011.) View Details
  4. Strategies to Fight Ad-sponsored Rivals

    We analyze the optimal strategy of a high-quality incumbent that faces a low-quality ad-sponsored competitor. In addition to competing through adjustments of tactical variables such as price or the number of ads a product carries, we allow the incumbent to consider changes in its business model. We consider four alternative business models, a subscription-based model, an ad-sponsored model, a mixed model in which the incumbent offers a product that is both subscription-based and ad-sponsored, and a dual model in which the incumbent offers two products, one based on the ad-sponsored model and the other based on the mixed business model. We show that the optimal response to an ad-sponsored rival often entails business model reconfigurations. We also find that when there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through the subscription-based or the ad-sponsored model, rather than the mixed or the dual model, because of cannibalization and endogenous vertical differentiation concerns. We discuss how our study helps improve our understanding of notions of strategy, business model, and tactics in the field of strategy.

    Keywords: Advertising; Business Model; Competition; Competitive Strategy;

    Citation:

    Casadesus-Masanell, Ramon, and Feng Zhu. "Strategies to Fight Ad-sponsored Rivals." Harvard Business School Working Paper, No. 10-026, September 2009. (Revised March 2010.) View Details
  5. Dynamics of Platform Competition: Exploring the Role of Installed Base, Platform Quality and Consumer Expectations

    This paper seeks to answer three questions. First, which drives the success of a platform, installed base, platform quality or consumer expectations? Second, when does a monopoly emerge in a platform-based market? Finally, when is a platform-based market socially efficient? We analyze a dynamic model where an entrant with superior quality competes with an incumbent platform, and examine long-run market outcomes. We find that the answers to these questions depend critically on two parameters: the strength of indirect network effects and consumers' discount factor of future applications. In addition, contrary to the popular belief that indirect network effects protect incumbents and are the source of market inefficiency, we find that under certain conditions, indirect network effects could enhance entrants' quality advantage and market outcomes hence could be more efficient with stronger indirect network effects. We empirically examine the competition between the Xbox and PlayStation 2 consoles. We find that Xbox has a small quality advantage over PlayStation 2. In addition, the strength of indirect network effects and consumers' discount factor in this market are within the range in which platform success is driven by quality advantage and the market is potentially efficient. Counterfactual experiments suggest that PlayStation 2 could have driven Xbox out of the market had the strength of indirect network effects more than doubled or had consumers' discount factor increased by fifty percent.

    Keywords: Price; Network Effects; Market Platforms; Monopoly; Quality; Competitive Advantage; Technology Platform;

    Citation:

    Zhu, Feng, and Marco Iansiti. "Dynamics of Platform Competition: Exploring the Role of Installed Base, Platform Quality and Consumer Expectations." Harvard Business School Working Paper, No. 08-031, November 2007. View Details

Cases and Teaching Materials

  1. Qihoo

    Qihoo, one of the largest Internet companies in China today, was founded in 2005. The company started its business by offering a security software product, and quickly dominated the market in China after its unusual move of giving its product away for free in 2009. Later, it expanded its offering to cover a broad spectrum of Internet and mobile security products. In 2012 the company launched its own Internet search engine called So.com. By August 2013, So.com captured 18% PC market share, and had posed a threat to Baidu, China's largest and most established search engine provider. Yet to compete against Baidu and other Chinese Internet giants in the long run, Qihoo needed to find a way to replicate its PC market success in the mobile market. How could Qihoo continue to evolve its search engine business and what was the best mobile strategy to help the company grow?

    Citation:

    Zhu, Feng. "Qihoo." Harvard Business School Case 615-017, July 2014. View Details

    Research Summary

  1. Overview

    Professor Zhu’s research interests center on technology strategy and innovation in platform-based markets, which represent a large and rapidly growing share of the economy. He examines the challenges in managing and growing platform-based businesses. Platform-based markets—ranging from operating systems to ad-sponsored media—must bring on board multiple groups of participants and effectively manage these groups in order to be successful. In his work, Professor Zhu developed a model to determine conditions under which a new platform can successfully enter a market where the incumbent has a significant installed-based advantage and empirically tested these conditions using data from the video game industry. He also empirically examined how open-content platforms such as Wikipedia can take advantage of the multi-sidedness of the market to overcome free-riding problems as they grow. In several other projects, he studied how platforms can dynamically adjust their strategies on each side of the market in response to the entry of a competitor. His latest research looks at how patent wars in the smartphone industry affect market shares of platform providers such as Apple’s iOS and Google’s Android system.

    In a related stream of research, Professor Zhu studies firms’ choices between multi-sided, platform-based and one-sided business models. Choosing between a multi-sided business model and a one-sided business model involves trade-offs. For example, it is not always optimal for firms to choose ad-sponsored business models, as advertisers produce a negative effect on the consumers’ side. In several projects, Professor Zhu has analyzed firms’ choices of fee-based and ad-sponsored business models. His analysis demonstrates the importance to an incumbent firm of considering modifications to its business model when competing with new entrants. In another study, he considers how the adoption of ad-sponsored business models affects content providers’ incentives. His empirical evaluation, using data from blogs, finds that ad revenue results in more popular content—and further that about half of the shift is based in more emphasis on the stock market, celebrities, and salacious content—but that it does not result in less niche content. Professor Zhu’s latest work in this area examines whether open-content platforms that are based mostly on voluntary contributors (e.g., Wikipedia) help achieve a neutral point of view better than traditional forms of content production (e.g., Britannica, an encyclopedia authored by experts).

    1. Winner of the 2013 Past Chairs' Emerging Scholar Award from the Technology and Innovation Management (TIM) Division of the Academy of Management.

    2. Winner of the 2013 Ascendant Scholar Award from the Western Academy of Management.

    3. Winner of the 2013 Distinguished Paper Award from the Business Policy and Strategy Division of the Academy of Management for his paper with Victor Bennett and Robert Seamans, "Value Appropriation, Search Frictions, and Secondary Markets."

    4. Winner of the 2013 Best Conference Paper Prize for Practice Implications from the Strategic Management Society at the SMS Annual International Conference for his paper with Victor Bennett and Robert Seamans, "Value Appropriation, Search Frictions, and Secondary Markets."

    5. Runner-up for the Best Conference Paper Prize from the Strategic Management Society at the SMS Annual International Conference in 2013 for his paper with Victor Bennett and Robert Seamans, "Value Appropriation, Search Frictions, and Secondary Markets."

    6. Received the Meritorious Service Award from Management Science in 2013.