Journal of Management Information Systems

Volume 37 Number 1 2020 pp. 191-216

Impact of Cyberattacks by Malicious Hackers on the Competition in Software Markets

Sen, Ravi, Verma, Ajay, and Heim, Gregory R


The number of malicious hacking incidents in our increasingly IT-enabled world has been increasing over the years. Conventional wisdom focuses on negative impacts of these malicious hacker activities. We posit that malicious hacker activities also might lead to some unintended consequences, specifically related to altering of software market structure, and associated stakeholder consequences. In this study, we model the competition between two software platforms in the presence of malicious hackers who perform cyberattacks against one or both software platforms. We compare a benchmark case where malicious hackers are either absent, or if present do not target the software platforms, against a first scenario where only one software platform is targeted, and a second scenario where both software platforms are targeted. Interestingly, we find the presence of malicious hackers’ activities is not always detrimental to all software industry stakeholders. In general, the results suggest that the presence of malicious hackers is more likely to result in a competitive market, while their absence is more likely to result in a monopoly. Furthermore, we show that under certain market conditions, the unsecure software platform targeted by hackers potentially can drive its more secure competitor out of the market.

Key words and phrases: software competition, malicious hackers, software markets, cyberattacks, software platforms