Forking, Fragmentation, and Splintering

Abstract

Although economic theory suggests that markets may “tip” toward a dominant platform or standard, there are many prominent examples of persistent incompatibility, interplatform competition, and standards proliferation. This paper examines the phenomena of forking, fragmentation, and splintering in markets with network effects. We illustrate several causes of miscoordination, as well as the tools that firms and industries use to fight it, through short cases of standardization in railroad gauges, modems, operating systems, instant messaging, and internet browsers. We conclude by discussing managerial implications and directions for future research.

Platform Governance Design in Platform Ecosystems: Implications for Complementors’ Multihoming Decision

“…Hence, one implication of our findings is that complex platforms would face higher risk of market tipping to their disadvantage. As modularity curtails the impact of ecosystem complexity, it also helps prevent market tipping (Simcoe & Watson, 2019).…”

“…To fully understand the implications of platform governance, we link contractual control (i.e., open vs. proprietary platforms) with technological consequences. We show that open governance, while favorable in prompting ecosystem growth (Simcoe & Watson, 2019), may cause unintended technological complexity for complementors due to increased platform interfaces. That sheds light on the key organizational challenge for platform owners to balance variety with ecosystem complexity (Cennamo & Santaló, 2019).…”

“…Yet increasingly, digital technologies have enabled firms to organize as platforms around which various types of producers coalesce into ecosystems (Jacobides, Cennamo, & Gawer, 2018; Shi, Li, & Chumnumpan, 2020). The multilateral interdependent relationships among different groups of producers could be a source of frictions in collaborative production (Adner, 2017) to which platform research has paid limited attention (with exceptions, such as Hagiu, 2014; Simcoe & Watson, 2019).…”

Editorial Introduction: The Special Issue on Strategy in the Digital Era

“…In "Forking, Fragmentation, and Splintering," Simcoe and Watson (2019) also push us to have a more nuanced view of network effects-not as a monolithic force of market dominance but as a process of technology evolution that may lead to multiple parallel pathways. Simcoe and Watson (2019) argue that in analyzing the parallelism in the process of "forking, fragmentation, and splitting," it is important to distinguish between instances of what they term strategic incompatibility, where the incompatibility is a consequence of strategic choice, and instances of coordination failure, where all parties would benefit if standardization could be achieved. Simcoe and Watson (2019) develop an analytical model that provides a clear delineation among the distinct processes of "forking," "fragmentation," and "splitting" and enrich this analytical structure by mapping their analysis to some of the central cases of the evolution of standards: browsers, instant messaging, modems, Unix, and that early case of railroads.…”

“…Simcoe and Watson (2019) argue that in analyzing the parallelism in the process of "forking, fragmentation, and splitting," it is important to distinguish between instances of what they term strategic incompatibility, where the incompatibility is a consequence of strategic choice, and instances of coordination failure, where all parties would benefit if standardization could be achieved. Simcoe and Watson (2019) develop an analytical model that provides a clear delineation among the distinct processes of "forking," "fragmentation," and "splitting" and enrich this analytical structure by mapping their analysis to some of the central cases of the evolution of standards: browsers, instant messaging, modems, Unix, and that early case of railroads. Barach et al (2019) provide a nuanced analysis of the role of big data and two-sided markets in the context of labor markets.…”