The Coevolution of Platform Dominance and Governance Strategies: Effects on Complementor Performance Outcomes

Abstract

and colleagues attending the UCL School of Management reading group for their feedback. We thank Jeanine Schouwenaars for assisting us in collecting data. We thank Gianvito Lanzolla for his editorial guidance as well as several anonymous reviewers who pushed us to improve upon our work. All mistakes are our own. THE COEVOLUTION OF PLATFORM DOMINANCE AND GOVERNANCE STRATEGIES: EFFECTS ON COMPLEMENTOR PERFORMANCE OUTCOMESMulti-sided platforms such as Apple's App Store and Valve's Steam become increasingly dominant when more end users and complement producers join their ecosystems. Despite their importance to a platform's overall success, however, we know little about complement producers and how they are affected by a platform's dominance trajectory: How does a platform's increasingly dominant market position affect performance outcomes for complementors? We explore this question by conducting a multiple case study on four market leading platform ecosystems over several years. We discover that, as a platform becomes increasingly dominant, the platform sponsor's governance strategies shift from being largely supportive of the wider complement population to becoming more selective and geared toward end users. These changes are associated with shifts in complementor performance outcomes.Though the value created at the overall ecosystem level increases as a platform gains dominance, average demand for individual complements decreases and becomes progressively concentrated. Furthermore, we find that prices for complements decline while the costs complementors incur increase. These findings are particularly salient in the context of digital platform ecosystems, where platform sponsors can seamlessly alter their technological infrastructures and implement changes to extend and solidify their dominant positions.

Platform Competition: A Systematic and Interdisciplinary Review of the Literature

“…If a platform ecosystem is organized around a powerful "hub" firm that owns or sponsors the platform, that firm has both incentive and ability to exert considerable influence to increase both the overall value created by the ecosystem and its own value capture (Hukal, Henfridsson, Shaikh, & Parker, 2020;Iansiti & Levien, 2004;Rietveld et al, 2019Rietveld et al, , 2020. In fact, failure to do so can lead to gaps in the ecosystem that seriously impair its ability to create value (Adner, 2006).…”

“…A growing body of research examines when a platform will subsidize complementors (e.g., Riggins, Kriebel, & Mukhopadhyay, 1994), collaborate with complementors (e.g., Mantovani & Ruiz-Aliseda, 2016), or produce complementary goods in-house (e.g., Adner & Kapoor, 2010; Nair et al, 2004; Tanriverdi & Lee, 2008) and why these strategies change over time (Cennamo, 2018; Huber et al, 2017; O’Mahony & Karp, in press; Rietveld, Ploog, & Nieborg, 2020). Researchers have also looked at how a firm learns which complements it should produce itself (Jiang, Jerath, & Srinivasan, 2011; Zhu & Liu, 2018), how platforms that produce some of their own complements manage their relationships with complementors that may feel threatened (e.g., Hagiu & Spulber, 2013; Niedermayer, 2013), how complementors and end users respond to a platform’s entry into complements production (Foerderer et al, 2018; Z.…”

Platform governance and the rural–urban divide: Sellers' responses to design change

“…The unanticipated behavior on the seller‐side may detract from a platform's design goals and render the platform environment undesirable for existing and potential participants. Despite a rising stream of research that examines how complementors respond to platform change (e.g., Rietveld, Ploog, & Nieborg, 2020; Zhang, Li, & Tong, 2020), we still have little knowledge of how sellers' unique circumstances affects their interpretations of and responses to design change platform governance (Boudreau & Hagiu, 2009). In particular, very few studies have studied sellers' local environments, which could be equally if not more important than platform conditions for influencing the direction of seller response to design changes.…”

Decentralized vs. Distributed Organization: Blockchain, Machine Learning and the Future of the Digital Platform

“…platform technology’ (Gawer, 2010, p. 293). Thus, to comprehend platform competition (Rietveld & Schilling, 2021) and its oligopolistic tendencies requires considering how platforms’ core technology structures their internal design, shapes their growth and influences industry structure (Rietveld, Ploog, & Nieborg, 2020) as well as the spectrum of possibilities regarding industry regulation. 5…”

“…Another neutrality-enhancing feature found to be appealing to complementors (Rietveld et al, 2020) is having an organizational goal different from shareholder value maximization, such as when non-profit foundations (e.g. Linux, Wikimedia) oversee the development of core platform infrastructure.…”