Let a Thousand Flowers Bloom? An Early Look at Large Numbers of Software App Developers and Patterns of Innovation

Abstract

It is often presumed that bringing more members on board a multi-sided platform will stimulate value creation. Here I study the thousands of software producers building applications ("apps") on leading handheld computer platforms (1999-2004). Consistent with past theory, I find a lock-step link between numbers of producers and varieties of software titles. The narrow, unchanging scope of producers and a series of other patterns are consistent with a pronounced role of specialization and heterogeneity of producers. I also find that while adding producers making different types of software stimulated investment incentives, consistent with network effects, adding producers making similar software crowdedout innovation incentives. The latter of these two effects dominates in this context. The patterns also indicate nonrandom generation and sorting of producers onto platforms, with later cohorts generating systematically less compelling software than earlier cohorts of entrants. Overall, added producers led innovation to become more dependent on population-level diversity, variation and experimentation-while drawing less on the heroic efforts and investments of any one individual innovator.

Unraveling Platform Strategies: A Review from an Organizational Ambidexterity Perspective

“…Pricing decisions greatly impact the size of customer bases, which are considered to be critical resources in network industries [9,43]. Based on pricing decisions, the literature has explained why some platforms have achieved exceptional market shares through virtuous cycles and why many firms have failed in this area [18,44,45].…”

“…Moreover, multihoming and compatibility mean that a platform owner has to share his or her customer base with other platforms [68]. Meanwhile, owners should be prudent enough to reject low-quality complements and avoid crowding effects that will lead to negative experiences from end users [2,44].In this respect, platform owners can exploit the resources of their platforms by keeping a limited group of members that fit a specific list of requirements [8].…”

Minimizing Complementors Risk in Third-Party Innovation: A Qualitative Comparative Analysis (QCA) of Digital Platform Configurations

“…Companies offering such complementary applications are called complementors or third-party developers [18]. To accelerate innovation on digital platforms, platform owners have to create and sustain vibrant ecosystems of third-party developers [9]. Modular platform architecture enables complementors to develop their own apps independently, yet platform interfaces ensure their interoperability.…”

Too Big to Fail? Overcrowding a Multi-Sided Platform and Sustained Competitive Advantage

“…Specifically, the likelihood of disruption is shown to be positively related to the relative number of sellers to buyers on the incumbent platform, when assuming buyers are variety seeking and act probabilistically (see e.g., [19], [20]). Consequently, we add to the literature on two-or multi-sided platforms ( [1], [2]), and platform-based markets ( [4]), by elaborating on how overcrowding a platform with too many sellers can erode its competitive advantage (see e.g., [21]- [23]). …”