RELOAD AND RELAUNCH: STRATEGIC GOVERNANCE OF PLATFORM ECOSYSTEMS JOOST RIETVELD
[email protected] Rotterdam School of Management Erasmus University Burgemeester Oudlaan 50 3062 PA Rotterdam Netherlands MELISSA A. SCHILLING
[email protected] New York University 40 West 4th Street New York, NY 10012 CRISTIANO BELLAVITIS
[email protected] Higher School of Economics National Research University 33, Kirpichnaya str. Moscow, 105187 Russia Paper Submitted to: Platform Strategy Research Symposium 2016 This version: March 22, 2016 RELOAD AND RELAUNCH: STRATEGIC GOVERNANCE OF PLATFORM ECOSYSTEMS Abstract Platform owners have a number of strategic levers for managing the value of their ecosystems. However, they must use them carefully: how and by whom that value is captured is shaped by the competitive dynamics between the producers of complementary goods and the platform itself. We begin by developing a framework of value creation and value capture in platform markets. This framework yields a number of implications for whether and when a platform owner should selectively promote individual complements. We test our arguments on data from seventh generation video game sales, assessing both how games are selected for promotion, and how promotion affects subsequent sales performance. We find that platform owners do not simply promote “best in class” complements; they strategically invest in underappreciated games where there is greater marginal value to be unlocked, and with whom the platform may have greater bargaining power. We also find important temporal effects. Keywords: Platform-based markets; ecosystems, complementors; value creation; value capture; video games. 1 1. INTRODUCTION Many products are only valuable and desirable when used with complementary goods or services (e.g., software for computers, fuel and service for automobiles) (Schilling, 2009).