ContentslistsavailableatScienceDirect
Research
Policy
j ou rn a l h om ep a g e :w w w . e l s e v i e r . c o m / l o c a t e / r e s p o l
Bridging
differing
perspectives
on
technological
platforms:
Toward
an
integrative
framework
Annabelle
Gawer
∗ImperialCollegeBusinessSchool,ImperialCollegeLondon,SouthKensingtonCampus,LondonSW72AZ,UnitedKingdom
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Articlehistory:
Received15November2010
Receivedinrevisedform24February2014 Accepted6March2014
Availableonline3May2014
Keywords: Platforms Double-sidedmarkets Modularity Economiesofscope Organizations
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Anintegrativeframeworkisproposedtoadvancemanagementresearchontechnologicalplatforms, bridgingtwotheoreticalperspectives:economics,whichseesplatformsasdouble-sidedmarkets,and engineeringdesign,whichseesplatformsastechnologicalarchitectures.Whiletheeconomic perspec-tiveinformsourunderstandingofplatformcompetition,theengineeringdesignperspectiveinformsour viewofplatforminnovation.Thearticlearguesthatplatformscanbeusefullyconceptualizedasevolving organizationsormeta-organizationsthat:(1)federateandcoordinateconstitutiveagentswhocan inno-vateandcompete;(2)createvaluebygeneratingandharnessingeconomiesofscopeinsupplyor/and indemand;and(3)entailamodulartechnologicalarchitecturecomposedofacoreandaperiphery.In supportofthisconceptualization,aclassificationsystemispresented,indicatingthattechnological plat-formsappearinavarietyoforganizationalforms:withinfirms,acrosssupplychains,andacrossindustry innovationecosystems.Asanillustration,theframeworkisthenappliedtoderiveasimplemodel high-lightingpatternsofinteractionbetweenplatforminnovationandcompetition,yieldinghypothesesthat couldbetestedempiricallybyfuturescholars.
©2014TheAuthors.PublishedbyElsevierB.V.ThisisanopenaccessarticleundertheCCBYlicense (http://creativecommons.org/licenses/by/3.0/).
1. Introduction
Thedigitalsectorprovidesseveralwidelyrecognizedexamples oftechnologicalplatformsandtheirassociated“platformleader” (GawerandCusumano,2002)or“keystonefirm”(IansitiandLevien, 2004),suchasGoogle,Apple,orFacebook.Eachofthesefirmsplays acentral,orchestratingrolewithinanetworkoffirmsand individ-ualinnovator–developersthathavecometobecollectivelyreferred toastheplatform’s“innovationecosystem” (AdnerandKapoor, 2010; Nambisanand Sawhney, 2011)or “ecologies of complex innovation”(DoughertyandDunne,2011).
Despitetheimportanceoftechnologicalplatforms, the man-agement researchagenda hasbeen limited and divided. It has been dominated by two distinct theoretical perspectives: one inspiredfromeconomictheory,and theotherfromengineering design.Theseperspectiveshavedevelopedseparately, andhave conceptualizedplatformseither as types of markets(two-sided markets, Rochet and Tirole, 2003) or as modular technological architectures (Baldwin and Woodard, 2009). Rooted indifferent
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E-mailaddress:[email protected]
intellectualtraditions,andbasedondistinctassumptions, these theorieshavefocusedonthedifferentdirectionalforcesplatforms respondto.Whiletheeconomicperspectivehasyieldedinsights onplatformcompetition,theengineeringdesignperspectivehas focusedonplatforminnovation.
Whileusefulstartingpoints,thesedifferingperspectiveshave nothelpedarticulatehowplatformcompetitionandplatform inno-vationinteract.Thisisaseriousissue,asinrealityplatformsoperate inwaysthat oftencombineinnovationwithincreased competi-tivetensionswithintheirecosystemsand/oracrossecosystems. For example,in 2012,thesocial networking platformFacebook innovatedonanewmobilephone“homescreen”application, Face-bookHome,havingusedAndroid(Google’smobilephoneoperating system,itself animportant technologicalplatform)as a tool to buildit.FacebookthenpositionedHometotakecentre-stageinthe end-usermobilephoneexperience,therebyexpandingFacebook’s presenceinthemobilephonespace,thusturningaformerly collab-orativerelationshipwithGoogleintoacompetitiveone.Inaddition, Facebook has innovatedin thedomain of social search, where Googlehasinnovatedaswell,establishinganotherspacewhere thesetwofirmswillcompeteevenmoresquarelyforend-users’ attentionandsourcesofdigitaladvertisingrevenues.These exam-plesindicatethatplatforminnovationandcompetitioncannotbe understoodinisolation,andsuggestthattheseforcesinteractto shapetheevolutionofplatforms.
http://dx.doi.org/10.1016/j.respol.2014.03.006
Theimportantissueofinteractionbetweenplatforminnovation andplatformcompetitionhasrecentlybeguntoattractscholars’ attention.Boudreau(2010)drawsontheengineeringdesign litera-turetostudy“openplatformstrategyandinnovation”.Meanwhile, Eisenmannetal.(2011)drawoneconomicanalysistopresentthe competitiveanalysisof“platformenvelopment”intermsofmarket entryandbundling.Thesestudiesareattentivetoplatform inno-vationaswellascompetition,neverthelesstheirdifferingframings reflecttheremaininggapbetweenthetheoreticalperspectiveson platforms.
Thisarticleaimstobridgethedominanttheoretical perspec-tives,andproposesaunifiedtheoreticalframeworkforresearchon technologicalplatforms.Ratherthaninterpretingplatformseither astypesofmarketsorasspecifictechnologicalarchitectures,the argumentdevelopedinthispaperculminatesinanew conceptual-izationofplatformsthatseesplatformsthroughanorganizational lens, which combines a specification of structure with a focus onagency, yet doesnot impose a priori a fixed organizational form,recognizingthemultiplicityoforganizationalcontextswithin whichplatformscanbefound.
The paper’s main thesis is that technological platforms can be usefully conceptualized as evolving organizations or meta-organizations1that:(1)federateandcoordinateconstitutiveagents whocaninnovateandcompete;(2)createvaluebygeneratingand harnessingeconomiesofscopeinsupplyor/andindemand;and (3)entailamodulartechnologicalarchitecturecomposedofacore andaperiphery.
Thisarticleofferstwomaincontributions.Thefirstcontribution istobridgetheeconomicdouble-sidedmarketandtheengineering designperspectives, bysummarizingand comparing systemati-callytheircontributions,arguments,assumptionsandlimitations. Idemonstratethattherehasbeenanundetectedconceptual com-monality betweenthetwo, namelythat platformscreate value through economies of scope in supply and/or in demand. The second contribution is the justification and elaboration of the newtheoreticalframeworkthatconceptualizestechnological plat-formsasevolvingorganizationsormeta-organizationscomposed ofagentswhocaninnovateandcompete.Takingonboard essen-tialinsightsfromthepreviousliteraturesyetrelaxingunnecessary assumptions,thisframeworkdoesnottakeaplatform’s organiza-tionalformasexogenousandfixed,andputsthefocusonagents withinplatforms.These agentscan beindividuals or firms,and canplayavarietyofroles,theserolesnotbeingrestrictedapriori tobeingeitheralwaysconsumers(asinthedouble-sidedmarket literature)oralwayscollaborativeinnovators(asinthe engineer-ingdesignliterature).Bydoingso,theframeworkmakesexplicit themicro-foundationsofhowplatformsoperate.Thisframework constitutesausefulcontributiontotheplatformsliterature,asit attemptstolayatheoreticalfoundationthatwillallowfuture scho-larstomakefurtherincrementalandcumulativedevelopmentto platformresearch.Inparticular,theorganizationallenson plat-formswillallowresearcherstotapintothevast organizational theoryliteraturetodevelopfurtherinsightsonhowplatforms oper-ateandevolve.
Theremainderof thearticleisstructuredasfollows.Section 2summarizesandbridgestheeconomicsandengineeringdesign anduncoversthecentralityofsupplyanddemandeconomiesof scopeinhowplatformscreatevalue.Section3presentsa classi-ficationsystemofthreedifferentcategoriesofplatforms(within
1 Theconceptofmeta-organization,originallyusedbyAhrneandBrunsson(2005)
tocharacterizeorganizationsoforganizations,wasfurtherclarifiedbyGulatietal. (2012).Inthispaper,weadoptGulatietal.(2012)’sdefinition:ameta-organization is“anorganizationwhoseagentsarethemselveslegallyautonomousandnotlinked throughemploymentrelationships”(Gulatietal.,2012,p.573).
Table1
Platformsineconomicsandengineeringdesign.
Literature Economics Engineeringdesign
Conceptualization Platformsasmarkets Platformsas technological architectures
Perspective Demand Supply
Focus Competition Innovation
Valuecreatedthrough Economiesofscopein demand
Economiesofscopein supplyandinnovation
Role Coordinatingdevice
amongbuyers
Coordinatingdevice amonginnovators
Empiricalsettings ICT ManufacturingandICT
firms,acrosssupplychains,andacrossindustryinnovation ecosys-tems),which isthenusedtodevelopthejustificationforanew conceptualizationofplatformsasorganizationsanditsassociated framework.Section4illustratestheframeworkbyproposinga sim-plemodel ofhowplatforminnovationandcompetitioninteract alongtheorganizationalcontinuumoftechnologicalplatforms.The paperconcludeswithadiscussionofitscontributions,limitations andavenuesforfurtherresearch.
2. Technologicalplatforms:conceptualizationsfrom economicsandengineeringdesign
Management research on technological platforms has been developed from two separate streams of academic literature: industrialeconomics(RochetandTirole,2003;Evansetal.,2006; Armstrong, 2006)and engineering design (Meyerand Lehnerd, 1997;KrishnanandGupta,2001;Jiaoetal.,2007).Theeconomics perspectivefocusesonhowplatformsasmarketsmediate transac-tionsacrossdifferentcustomergroupsand hownetworkeffects fuel platform competition. In contradistinction, the engineer-ingdesignperspectiveviewsproductplatformsastechnological designs that help firms generate modular product innovation. Table1summarizesandhighlights thedifferencesand similari-tiesbetweentheeconomicsandtheengineeringperspectiveson platforms.
2.1. Theeconomicsperspective:platformsasmarkets
Sincetheearly2000s,asectionoftheindustrialorganization economicsliteraturehasbeguntodevelop theoryonplatforms, which have been variouslyreferred toas “two-sided markets”, “multi-sided markets”, or “multi-sided platforms” (Rochet and Tirole,2003,2006;Evans,2003;Rysman,2009).Economistsview platformsasspecialkindsofmarketsthatplaytheroleof facilita-torsofexchangebetweendifferenttypesofconsumersthatcould nototherwisetransactwitheachother.
Essentialtomosteconomicdefinitionsofmulti-sidedplatforms aretheexistenceof“networkeffects”thatarisebetweenthe“two sides”ofthemarket(Evans,2003;RochetandTirole,2003,2006; Armstrong,2006).Forexample,Armstrong(2006,p.66)defines two-sided marketsas“markets involvingtwo groups of agents interactingvia‘platforms’whereonegroup’sbenefitfromjoining aplatformdependsonthesizeoftheothergroupthatjoinsthe platform”.EvansandSchmalensee(2008,p.667)definetwo-sided platformsas“businessesinwhichpricingandotherstrategiesare stronglyaffectedbytheindirectnetworkeffectsbetweenthetwo sidesoftheplatform”.
Theconceptofnetwork effectsissocentralinthisliterature thatRysman(2009,p.127)statesthat“inatechnicalsense,the literatureontwo-sidedmarketscouldbeseenasasubsetofthe literatureonnetworkeffects.”Mostmodelstakenetworkeffects asexogenousandfixed,andseethemasthefundamentaldrivers
ofplatformcompetition.Networkeffectstriggeraself-reinforcing feedbackloopthatmagnifiesincumbents’earlyadvantages.Strong network effects canundercertain conditionsdrivecompetition betweenplatforms toa “winner-take-all” outcome (Eisenmann etal.,2006).
Foranillustrationofthisself-reinforcingmechanism,consider thecaseofvideogamesconsolesanditscompatiblevideogames: atechnologicalplatform(forexampletheNintendoWiigame con-sole)endowedwithaninitiallylargerinstalledbaseofend-users (gamers)willhavetheeffectofincreasingtheincentivesfor deve-lopersofcomplementaryproductsorservices2(here,videogame developers)tojointheWiiplatformanddevelopWii-compatible videogames;this increasedprovisionofcomplementswould,in turn,helptoattractmoreend-userstotheWiiplatform.
Theliteraturedistinguishesbetweentwomainkindsofnetwork effects:directnetworkeffectsandindirectnetworkeffects.Direct networkeffects,alsocalledsame-sidenetworkeffects,arisewhen thebenefitofa technologytoauserdepends positivelyonthe numberofotherusersofthistechnology,asforexampleina tele-phonenetwork,orthenetworkofSkypeusers.Indirectnetwork effectsandtheassociatednotionofcross-groupnetworkeffects arepreciselydefinedbyHagiuandWright(2011, p.5)assuch: “Across-groupnetworkeffectarisesifthebenefittousersinat leastonegroup(sideA)dependsonthenumberofotherusersin theothergroup(sideB).Anindirectnetworkeffectarisesifthere arecross-groupnetworkeffectsinbothdirections(fromAtoBand fromBtoA)andsideB’sparticipationdecisiondependsonthe num-berofparticipantsonsideAsothatthebenefittoauseronsideB depends(indirectly)onthenumberofusersonsideA.”Indirect networkeffectsthereforereflectapre-existingunderlying inter-dependency(andcomplementarity)betweenthedemandsfrom twoor moretypesofconsumers. Thiscomplementarityinturn fuelsaself-reinforcingfeedbackloopofadoption“frombothsides”, thathastheeffectofreinforcingincumbentplatformowners’early installedbaseadvantages.
Networkeffectsaresometimescharacterizedasdemand-side economiesofscale(KatzandShapiro,1986,p.824;ParkerandVan Alstyne,2005,p.149).Isuggesthowever,tobemoreprecise,that whiledirectnetworkeffectsconstitutedemand-sideseconomies ofscale, indirectnetwork effects infact constitutedemand-side economiesofscope,apointIshallreturntoinmoredetailinSection 2.2.
Platformcompetition in economics models is driven bythe adoption of the platform by multipleconsumer constituencies, itselffuelledbynetworkeffects.Asthevalueoftheplatformstems principallyfromthe accessof “one side”tothe“other side”of theplatform,thequestionofplatformadoptionbecomes“howto bringmultiplesidesonboard”(Evans,2003;Rochet andTirole, 2006)whileavoidingthe“chicken-and-eggproblem”(Caillaudand Jullien,2003).ParkerandVanAlstyne(2005),RochetandTirole (2003,2006)andmostothersinthisliteraturesuggestthat ade-quatepricing,involvingthesubsidizingof“oneside”oftheplatform inordertoattractthe“otherside”tojoin,solvesthiscoordination problem.
Theempiricalevidenceinthisliteraturehasgenerallyconfirmed thevalidityoftheeconomicapproachinexplainingthedifference inpricingandbusinessmodelsamongvariousplatformmarkets, drawingfromexamplesgenerallytakenfromtheICTindustry,the mediaadvertisingindustry,orthepaymentindustry(seefor exam-pleRysman,2004;Evansetal.,2006;Wilbur,2008).
2Ishallfromnowonusetheword“complementor”(BrandenburgerandNalebuff,
1997)asashorthand(andsynonym)forthelongerphrase:“developerof comple-mentaryproductsorservices”.
Insummary,theeconomictheoreticalperspectivepositsthat platformsfundamentallycreatevaluebyactingasconduitsbetween two(ormore)categoriesofconsumerswhowouldnothavebeen abletoconnectortransactwithouttheplatform.Platforms cre-atevaluebycoordinatingthesegroupsofconsumersandinthe economicviewthiscoordinationiseffectedthroughpricing.The valuethatconsumersaswellastheplatformownercancapture increaseswithincreasingcustomerbases, inavirtuouscycleof indirectnetworkeffects.Thesenetworkeffects,viewedasan essen-tial feature of platforms, reflect exogenous interdependence of demandbetweenconsumergroups,andshapeplatform competi-tion.Theeconomicviewhelpsexplainwhysomeplatformsbecome dominant,andmayevengiveriseto“winner-take-all”competitive outcomesunderspecificcircumstances.
Whilequiteinfluential,theeconomicperspectiveonplatforms restsonstrong,yetoftenimplicitassumptions,whichgiveriseto twomainlimitations.First,inmosteconomicmodelsoftwo-sided markets,platformsaretakentobebothexogenousandfixed.As such,thesemodelsdonotoffermuchinsightintowhatdetermines howorwhytheywouldevolve.Second,thenatureofthe relation-shipbetweentheplatformownerandthetwosidesoftheplatform isreducedtothatofaseller–buyerrelationship,wherebothsidesof theplatform,whethertheyareend-usersorinnovativedevelopers ofcomplementaryproducts,areequallyseenandtreatedassimple consumers.Thedevelopersofcomplementaryproductsorservices arenotseenassuppliers,orasinnovators,butasconsumers.A deci-sionbycomplementorstoinnovateontopofaplatformisviewed asaconsumptionchoice,anadoptiondecision.
While this simplification may make sense if one describes thebehaviour of dating bars facilitating thematching between menandwomen (acommonmotivatingexamplein this litera-ture),thisassumptionisproblematicfortechnologicalplatforms, whicharethefocusofthisarticle.Thisreduction ofthe modal-ityofinteractionbetweenplatformcomplementsdevelopersand platformproducerstoapassiveconsumptionrelationshiphas sev-erallimitingconsequencesforthoseinterestedinhowplatforms evolve:(a)allformsofcompetitiveinteractionbetweenaplatform owneranditsowncomplementsdevelopersareleftunexamined (as outside the scopeof thesemodels); (b) thevery existence ofcomplementarity-in-demandbetweenthedifferent“consumer groups”(thefoundational“networkeffects”)istakenforgranted, deemedexogenous,andassumedtobeunchanging;(c)the exist-enceof theplatformitself isalsotaken forgranted, exogenous andunchanging;(d)theimpactofplatformdesignondevelopers’ incentivestoinnovateisleftuntreated.
Thetwo-sidedmarketseconomicperspectiveoffersthereforea static,demand-sideviewofplatformcompetition(asunderstood ascompetition betweenplatforms, notwithinplatform ecosys-tems).Ithighlightswellconditionsunderwhichsomeplatforms canattainrapidlypositionsofsustainedmarketdominance,but byandlargedoesnotaddresstheissuesofplatformevolutionand platforminnovation.
While the thrust of the multi-sided literature is summa-rizedabove,recentdevelopmentsinmanagementresearchhave extendeditindirectionsthatbegintochallengeitsstatic, demand-side assumptions. For example,Eisenmann et al. (2009) enrich the multi-sided view by bringing in concepts from the supply side,referring toplatformsas“multi-sidednetworks”thathave both“demand-sideusers”and“supply-sideusers”.Subsequently, Eisenmannetal.(2011)begintoaddresshowplatformcompetition canleadtoplatformschangingscopeovertime,intheir presen-tation of “platform envelopment”, a bundling strategy through whichplatformsattacktheirtargetbyextendingtheir function-alitiesthroughleveragingshareduserrelationships(demand-side economiesofscope)aswellascommoncomponents(supply-side economiesofscope).
2.2. Theengineeringdesignperspective:platformsas technologicalarchitectures
Industrialorganizationtheoristswerenotthefirsttodevelop theconceptofplatforms.MorethantenyearsbeforeRochetand Tirole’s(2003)characterizationofplatformsastwo-sidedmarkets, thetermwaspercolatingthroughthenewproductdevelopment literature,whereitsoongaverisetoawell-developedtheoretical perspectiveonplatformsandtheireffectoninnovation.
Idealsofrationalproductionandsystematicdesignofcomplex systems,combinedwithSimon (1962)’s suggestionthat hierar-chical and decomposable systems help mitigate the effects of complexity,nourishedasetofinterrelatedliteraturesonnew prod-uct development,operations and production management, and lateronmodularity,whichIregroupunderthelabelof engineer-ingdesignperspective.Theseliteratureshaveattemptedtoexplore theimplicationsofso-called “designhierarchy”(Clark,1985)on methodsofproductdevelopmentandproduction.Itdevelopedthe conceptof product platforms, and highlightedspecific kinds of designchoicesonproductarchitecture(Ulrich,1995)thatcould help firms generate product families (Sanderson and Uzumeri, 1995)andinnovatemorequicklyandsystematicallybyusingand re-usingcommonassets(KrishnanandGupta,2001)astemplates forproductinnovation.
For Wheelwright and Clark (1992, p. 73), the earliest man-agementscholarstorefer explicitly totheconceptof platform, platformsareproductsthatmeettheneedsofacoregroupof cus-tomers,butcanbemodifiedthroughtheaddition,substitution,or removaloffeatures.ForMcGrath(1995),platformsarecollections ofcommonelements,especiallytechnologicalones,implemented acrossarange of products.Meyerand Lehnerd(1997)define a platformas a setof subsystemsand interfaces forminga com-monstructurefromwhichastreamofproductscanbedeveloped. KrishnanandGupta(2001)defineplatformssimplyascomponent andsubsystemassets sharedacrossa family ofproducts, while MuffatoandRoveda(2002)addtheperspectiveofan intention-allyplannedanddevelopedsetofsubsystemsandinterfacesfrom whichproductscan bedeveloped.Robertson and Ulrich(1998) proposeabroaderdefinition:theassets(components,processes, knowledge,people,orrelationships)sharedbyasetofproducts.
Theseplatformdefinitionsallshare thecommonalityof sys-tematicre-useofcomponentsacrossdifferentproductswithina productfamily,whichallowseconomiesofscopeinproductionto occur.Hence,thesystematiccreationandharnessingofeconomies ofscopeininnovationcanbeseenasonefundamentalprincipleof platform-basednewproductdevelopment.
“Economiesofscope”(PanzarandWillig,1975,1981; Teece, 1980,1982)existwhenthecostofjointproduction islessthan thecostofproducingeachoutputseparately.Forthecontextof platform-based newproduct development,Ipropose toextend theconceptofeconomiesofscopeinproductiontotheconcept ofeconomiesofscopeininnovation.Idefineeconomiesofscope ininnovationaswhenthecostofjointlyinnovatingonProductA andBislowerthanthecostofinnovatingonAindependentlyof innovatingonB.3
Empiricalstudieswithintheengineering designstreamhave identifiedsucheconomiesofscopecanoccurinavarietyof indus-trialcontexts(suchasautomotivemanufacturing,aerospaceengine manufacturing,consumerelectronics),andavarietyof organiza-tionalsettings.Forexample,whileearlystudiesofmanufacturing
3 Whilefurtherdevelopmentofthisconceptisoutsidethescopeofthisarticle,
asimilarconceptisfoundinBresnahanandTrajtenberg(1995)’sstudyofgeneral purposetechnologieswhentheyformalizewhattheycall“innovation complemen-tarity”.
platformsobserved them within firms, researchhas also docu-mented how manufacturing platforms were increasingly being sharedacrossfirmswithinsupply-chains(Brusoni,2005;Zirpoli andBecker,2011;ZirpoliandCaputo,2002;BrusoniandPrencipe, 2009;Sturgeon,2002;Doran,2003;Huangetal.,2005;MacDuffie, 2013; MacDuffieand Helper,2006; Sako,2009; Simpsonet al., 2006;Tatsumotoetal.,2009).Mostrecently,technological plat-formshave beenfoundtooperatewithinevenlargernetworks offirms thatare notnecessarily linkedthrough buyer–supplier relationships – also known as “innovation ecosystems” (Adner andKapoor,2010;NambisanandSawhney,2011)or“ecologiesof complexinnovation”(DoughertyandDunne,2011).Such indus-tryplatformsarethendefinedas‘...abuildingblock,providingan essentialfunctiontoatechnologicalsystem–whichactsasa foun-dationuponwhichotherfirms,looselyorganizedinaninnovation ecosystem,candevelopcomplementaryproducts,technologiesor services’(Gawer,2009a:2;Gawer,2009b:54).
Platformdesignstandsoutasacommonelementacrossthisset oforganizationalcontexts(Huangetal.,2005;Simpsonetal.,2006; Jiaoetal.,2007).Gawer(2009c)andBaldwinandWoodard(2009) highlightthatallobservedplatformsshareastructural common-ality:thatofamodulartechnologicalarchitecture(Ulrich,1995; BaldwinandClark,2000).4BaldwinandWoodard(2009)present themostadvancedattempttocharacterizewhatisuniqueabout platformsarchitectures:theyviewplatformsashavingaparticular typeoftechnologicalarchitecturethatisnotonlymodularbutalso structuredaroundacoreandaperiphery.Inthisview,“aplatform architecturepartitionsasystemintostablecorecomponentsand variableperipheralcomponents”;theplatformitselfisconstituted bythestablecoreoftheproductsystem(emphasisadded)(Baldwin andWoodard,2009,p.24).
Facilitatinginnovation is therefore what platforms, as mod-ularsystems,are particularlygood for.The centraltenetofthe modularityliteratureispreciselythatmodularproduct architec-turesfacilitateinnovation(LangloisandRobertson,1992;Baldwin andClark,2000;Schilling,2000).Thisisbecause,first,modularity helpsmanagecomplexity:bybreakingupacomplexsysteminto discretecomponents,whichinteractthroughstandardized inter-faceswithinastandardizedarchitecture,onecaneliminatewhat wouldotherwisebeanunmanageablespaghettitangleofsystemic interconnections(Simon,1962;Parnas,1972;Langlois,2002).The secondandrelatedreasonisthatmodularity,byreducingthe inter-dependenciesbetweenmodulestosimpleinterconnectivityrules, reducesthescopeof informationthat designersneedtodesign theirmodules,andallowsaspecializationanddivisionof innova-tivelabour.Thisfacilitatesautonomousinnovationwithinmodules, aswellasmix-and-matchinnovationthroughinnovative recombi-nationofmodules(GarudandKumaraswamy,1995).
Theroleof“interfaces”isthereforefundamentaltohow modu-larityfacilitatesinnovation.Amodulararchitecturedividesallthe informationrequiredtobuildthesystemintovisibleandhidden information.ForBaldwinandClark,“whenthecomplexityofone oftheelementscrossesacertainthreshold,thatcomplexitycan beisolatedbydefiningaseparateabstractionthat hasa simple interface.Theabstractionhidesthecomplexityoftheelement;the interfaceindicateshowtheelementinteractswiththelarger sys-tem”(BaldwinandClark,2000,p.64).ForBaldwin(2008),aphysical
4Ulrich(1995)definesproductarchitectureas“theschemebywhichthefunction
ofaproductisallocatedtophysicalcomponents”(Ulrich,1995,p.419),andmore preciselyas:(1)thearrangementoffunctionalelements;(2)themappingfrom functionalelementstophysicalcomponents;(3)thespecificationoftheinterfaces amonginteractingphysicalcomponents(Ulrich,1995,p.422).ForBaldwinandClark (2000,p.63),“Anarchitecturespecifieswhatmoduleswillbepartofthesystemand whattheirfunctionswillbe”;while“interfaces”describeindetailhowmoduleswill interact,includinghowtheyfittogetherandcommunicate.
interfacebetweenmodulesbecomesthephysicalembodiment,or materialinstantiation, of thedivision oflabour between differ-entteams.Theinterfaceisthereforeadivider(oflabourbetween distinctteams), but alsoaconnector, and a conduitofselected informationfacilitatinginterconnection.
Thedegreeof“openness”ofinterfaceswillthereforehavean influenceontheextenttowhichthisfacilitationofinnovationcan happen.Theconceptofopeninterfacescanbeafuzzyone(West, 2007)butItakeithereinthecommonlyunderstoodsenseofthe interfacecontainsinformationthatisaccessibletoexternalagents andusablebythemtoallowtobuildcomplementaryinnovation thatiscompatiblewiththisinterface.Whilemodularinnovation canhappenwithinafirmifallrelevantinformationissharedwithin thefirmmembers,innovationcanalsobefacilitatedattheindustry level,dependingonhowopentheinterfacesbetweenmodulesare (LangloisandRobertson,1992).
Inthecontextofplatforms,openingasystemto complemen-tarydevelopmentaffectsinnovation bydrawingona widerset ofaccessibleexternalcapabilitiesanddistributedheterogeneous knowledge(Chesbrough,2003),aswellasindependent experimen-tation.
In summary, the engineering view interprets platforms as purposefullydesignedtechnologicalarchitectures(including inter-faces) that facilitateinnovation. Thisviewsays that the design anduseofplatformshelpsfirmsachieveeconomiesofscopein productionanddesign–allowingforeconomiesofscopein inno-vation.Whileitisextremelyusefultounderstandhowplatforms stimulateinnovation,theengineeringdesignperspectiveon plat-forms has several important limitations. This perspective sees essentiallyplatformsas structurallystable: innovation happens onmodules, within stable system architectures, and facilitated by stable interfaces;this viewtherefore does not help explain how platforms themselves evolve (that is, how what Baldwin andWoodard(2009)wouldcallthe“core”,evolves).Inaddition, thisstreamofresearchdoesnotprovideinsightsoncompetition betweenplatforms(whichtheeconomicsliteraturedoes),andit failstotakeintoaccountthepossiblecompetitionbetween plat-formownersandcomplementors(whichtheeconomicsliterature alsoignores).
Whilethethrustoftheengineeringdesignliteratureis summa-rizedabove,recentdevelopmentsinmanagementresearchhave extended it in directions that attempt to articulate how plat-forminnovationandplatformcompetitioninteractovertime.For exampleBoudreau(2010)presentsanempiricalstudyofmobile handheldplatforms, andfinds aninvertedU-shaperelationship betweeninnovationandopeningplatformaccess,consistentwitha “crowdingout”ofinnovationincentiveswhencompetitionamong complementorsincreasebeyondacertainlevel,ahypothesis con-firmedinBoudreau(2012).
3. Towardanintegrativeframeworkforplatforms 3.1. Motivation
Therealityofplatformdynamics,andinparticularofhow com-petitionand innovationinteract, ismore complexthantheone drawn by Boudreau (2010, 2012) and Eisenmann et al. (2009, 2011). Theyanalyze competitionbetween platformsas wellas competitionbetweencomplementors.However,neitheraddresses the question of competition between the platform owner and its complementors, which frequently occurs in platform-based ecosystems.
ConsiderforexampletheshiftingrelationshipbetweenGoogle andApple,andbetweenFacebookandGoogle,inthemobile sec-tor.Appleused tobundleGoogleMapsas apartof theiPhone
homescreen,buttheiPhone5replaceditwithitsownApplemaps application.FacebookhasusedGoogle’sAndroid’APIs5todevelop its mobile phone “homescreen” application, thus shifting from beingacomplementortocompetingdirectlywithGooglefor end-users’attentionandadvertisingrevenues.Earlierexamplesinclude theshiftingrelationshipbetweenNetscapeandMicrosoftinthe late1990s:NetscapestartedasacomplementortoWindows,but itssuccesscausedMicrosofttotreatitasacompetitor,triggering the“envelopment”ofthebrowserwiththeintroductionInternet Explorer.
Theopposite dynamiccanalsooccur,whencompetitors ally tocreateacommonplatform.Inthelate1990s,Symbianrallieda coalitionofcompetingmobilehandsetmanufacturers(Nokia, Erics-son,Motorola,Siemens),inordertoattempttocreateasmartphone operatingsystemwhichwouldforestallMicrosoft’sentryintothe mobilemarket.
In addition,thefixedrolesimposed onagentsby the previ-ousliteraturesrestrictedthemtoeitherbeingconsumers(perthe double-sidedmarket literature)or collaborativeinnovators (per theengineeringdesign literature).Thesedonotreflectcommon empirical patterns of how a number of platforms operate and evolve,sinceintoday’sdigitaleconomyusersoftenplaybothroles innon-separableways.
Consider for example the case of important contemporary digital platforms suchas Google or Facebook. While end-users “consume”theservice(search,socialnetworking)offeredbythese platforms, they also constantly “feed”, individually and collec-tively,theirpersonaldataintotheseplatforms(asexpressedby theitemstheysearch,theirlocation,theirpreferencesasrevealed bypreviousqueries,andtheirpersonalconnectionsdata),thereby providingtheverydataupon whichtheseplatformsdrawupon todeliveritsservices.Usersplaythereforetheroleof(generally unpaid)contributorstothesupplyof(andfurtherinnovationon) theplatformitself.
Agents’changingroleswithinplatform-basedecosystems(from complementortocompetitorforexample,orviceversa)and asso-ciatedshiftingpatternsofcollaborationandcompetition,arein facta featureof ecosystems(Iansitiand Levien,2004),onethat ought tobe treated explicitly in rigorous attempts to theorize technological platforms.This is particularlyrelevant for digital platforms, as Baldwin and von Hippel (2011) suggest that the transitiontoincreasingly digitized andmodularizeddesign and production practices,coupledwiththeavailability of very-low-cost,Internet-basedcommunication,iscreatinga“paradigmshift” wherebyinnovationisnotrestrictedtoproducersanymore,but thatusersareincreasinglyableandwillingtoengageindistributed andcollaborativeinnovation.
Wethereforeneedatheoreticallysound,integrated conceptu-alizationofplatformsthatallowsmulti-modalinteractionbetween agentswithinandacrossplatforms,andthatwouldallowscholars tostudythewaysinwhichcompetitionandinnovationshapethe wayplatformsevolve.InthenextsectionIdevelopsucha concep-tualization,andargueforthevalueofanalyzingplatformsthrough anorganizationallens.
5Anapplicationprogramminginterface(API)isdefinedbytheSoftware
Engi-neeringInstituteas“atechnologythatfacilitatesexchangingmessagesordata betweentwoormoredifferentsoftwareapplications.”(“ApplicationProgramming Interfaces,”vol.2004:SoftwareEngineeringInstitute–CarnegieMellonUniversity, 2003).Inotherwords,anAPIreferstoasoftwareinterfacethatdefinestheservice thatonecomponent,module,orapplicationprovidestootherssoftwareelements. Generallyinvisibletoend-users,APIsarecarefullythoughtoutpiecesofcode cre-atedbyprogrammersfortheirapplicationsthatallowotherapplicationstointeract withtheirapplication.
Table2
Aclassificationoftechnologicalplatforms.
Internalplatform Supply-chainplatform Industryplatform
Levelofanalysis •Firm •Supply-chain •Industryecosystems
Platform’sconstitutive agents
•Onefirm •Assembler •Platformleader
•Itsconstituentsub-units •Suppliers •Complementors
Technological architecture
•Modulardesign
•Coreandperiphery
Interfaces •Closedinterfaces •Interfacesselectivelyopen •Openinterfaces
Interfacesspecificationsare sharedwithinthefirm,butnot disclosedexternally
Interfacespecificationsareshared exclusivelyacrossthesupply-chain
Interfacespecificationsareshared withcomplementors
Accessibleinnovative capabilities
•Firmcapabilities •Supply-chain’scapabilities •Potentiallyunlimitedpoolofexternalcapabilities Coordination
mechanisms
•Authoritythrough managerialhierarchy
•Contractualrelationsbetweensupply-chain memberorganizations
•Ecosystemgovernance
◦Inthespecialcaseofmulti-sided markets:exclusivelythroughpricing
Literature •SandersonandUzumeri(1995) •Brusoni(2005) •GawerandCusumano(2002)
•MeyerandLehnerd(1997) •ZirpoliandBecker(2011) •BaldwinandWoodard(2009)
•Simpson(2004) •Sako(2009) •Boudreau(2010)
•Eisenmannetal.(2011)
Examples •BlackandDecker(machinetools) •Renault–Nissan(automotivemanufacturing) •Facebook(socialnetworking)
•SonyWalkman(consumer electronics)
•Boeing(aerospacemanufacturing) •Google(Internetsearchandadvertising)
•AppleiPhoneandApps(Mobile)
3.2. Parametersoftheframework
In the previous section I established that, underlying their obviousdifferences,theeconomicsandtheengineeringdesign per-spectivesshareacommonimportantconceptualunderpinning:in ordertocreatevalue,platformsrelycruciallyoneconomiesofscope insupplyandinnovation(fortheengineeringdesign view),and economiesofscopeindemand(fortheeconomicsview).Giventhe centralityofeconomiesofscopeintheoriesoforganizations(Teece, 1980;Wernerfelt,1984;HelfatandEisenhardt,2004),this com-monunderpinningprovidestheintuitionthat anorganizational lensmightbeusefultodevelopaunifyingframeworkforplatforms. ByorganizationIdonotnecessarilymeanonefirmoronelegal entity,noronetypeoforganizationalformbutrather,returningto afundamentaldefinitionofwhatorganizationsare(Barnard,1938, p.73),a“systemofcoordinatingactivitiesoftwoormorepersons”, withoutanyaprioriastotheorganizationalformitmighttake.
Akeyconceptualbarriertobridgingcurrent perspectiveson platformsmaylieintheirrespectivefixedassumptionsaboutthe organizationalformthatplatformstake.Inordertodevelopa uni-fiedframeworkIallowtheorganizationalformtobeanendogenous variable.
Inaddition,wehaveseenthatintoday’sdigitaleconomy,users oftenplaybothroles(consumer,innovator)innon-separableways. Todevelopaversatileyetunifiedframeworkfortechnological plat-forms,itmightthereforebeusefultorefrainfrompre-determining aprioriwhethertheagentswhoconstituteitplaytheroleof “sup-ply”or“demand”.Letusthereforeallowmulti-modalinteraction andpossiblyevolvinginteractionbetweenplatforms’constitutive agents.
Aunifiedframeworkforplatformsshouldthereforenotimpose a priori the organizational context within which they occur, whetherwithinfirmsoracrossmarkets.Itwouldpresentplatforms inthediversewaysinwhichastheyappearinreality,in differ-entorganizationalcontextsandatdifferentlevelsofanalysis,and highlighttheiressentialcharacteristics.Itshouldalsoallow multi-modalinteractionbetweenplatformagents,eitherwithinoracross platforms.
Inordertofurtherdevelopthisframework,Ipresenta classifica-tionsystembasedonananalysisofthevariousplatformliteratures
and associated key examples (Table 2). Table 2 classifies plat-formswithinthreeincreasingly broaderorganizationalsettings: withinfirms,acrosssupply-chains,andwithinecosystems.Each ofthethreeorganizationalsettingshasacorrespondingtypeof platform,forwhichIhavehighlighted:thelevelofanalysis;the platform’sconstitutiveagents;itstechnologicalarchitecture;the natureofitsinterfaces;itsinnovativecapabilities;andits coordi-nationmechanisms.Inaddition,arepresentativesetofrelevant empiricalexampleshasbeenincluded,alongwithkeyresearch articles.
Table2highlightsthefollowingresults.
First,thephenomenonofplatformsisobservableatdifferent levelsof analysisand invarious organizational settings:within firms,acrosssupply-chains,andacrossindustryecosystems.
Second,dependingontheorganizationalsetting,the constitu-tiveagentsoftheplatformare:afirmanditssub-units(ininternal platforms);oranassembleranditssuppliers(insupply-chain plat-forms);or,aplatformleaderanditscomplementors(inindustry platforms).
Third,allplatformsshareacommonmodulararchitecture orga-nized around a coreand a periphery. Thisis a confirmation of BaldwinandWoodard(2009)intuition.Thiscommontechnological architectureconstitutesthereforeaconstantthroughoutallkinds ofplatforms,andcutsacrossallorganizationalforms.
Fourth,allplatformshavetechnologicalinterfaces(betweenthe “core”andthe“periphery”)and,dependingonwhethertheyare withinfirms,withinsupply-chains,or withinecosystems,these interfacesare closed,semi-closed,oropen. Asexplainedearlier (andasinWest,2007),theconceptofopeninterfaceisneverblack andwhite,andevenwithinecosystems,therearevariationswithin thespectrumofhowopentheseinterfacesare.Forexample,Apple’s iPhoneecosystemhasbeendescribedasa“walledgarden”(Hazlett etal.,2011),whileGoogleAndroid’soperating systemhasbeen seenas“moreopen”,andopensourcesoftwarehasbeenseenasa purelyopenecosystem.Butgenerallyasonemovesfrominternal platforms(withinfirms)toindustryplatforms(withinecosystems), interfacesbecomemoreopen.
Fifth, as the scope of the platform broadens from internal platformthroughsupply-chainplatformandontoindustry plat-form,theplatform’saccesstoinnovatingagentsandtheirdiverse
capabilitiesincreases.Whileforfirm-levelplatformsthesourcesof innovationarerestrictedtowithinthefocalfirm,andfor supply-chainplatformswithinthefocalfirm’spoolofsuppliers,within ecosystems,innovatorscouldbeanyone,andmaybefound any-where.Theplatformownermaynotknowex-antewhoorwhere innovatorsmaybe.Infact,aninteresting specificityofindustry platformsis thatan industryplatform ownerdoesnot needto knowex-antewhoacomplementaryinnovatormightbe.Potential innovatorsof complementaryproductsself-identifytothe plat-formowner,andcanutilizethecodifiedinformationonplatform connectors(suchasAPIs)andprogrammingtoolsthataredisclosed byplatformowners tobuildcompatible complements.Industry platformsthereforereducetheplatformowner’ssearchcostfor complementaryinnovatorsandextendthepoolofaccessible inno-vativecapabilitiesthatwillindirectlycreatevaluefortheplatform. Sixth,thecoordinationmechanismsoperatingwithininternal platformsarethoseofthemanagerialhierarchy,thoseoperating acrosssupply-chains arebuyers–supplierscontracts,andwithin ecosystemsthecoordinationisensuredbyecosystemgovernance, apointwhichIshallreturntolater.
Theresultingclassificationsystemsupportsaunifiedviewof platformsinthatithighlightsthatthedifferenttypesofplatforms describedinthedifferentplatformliteratures,farfromascribing tofundamentallydifferentphenomena,constituteinfactvarious manifestationsofanunderlyingsimilarphenomenon.
Thepreviousanalysissupportstherefore aunified conceptu-alizationofplatformsasorganizations,asfollows:Technological platformscanbeusefullyseenasevolvingorganizationsor meta-organizationsthat:(1)federateandcoordinateconstitutiveagents whocaninnovateandcompete;(2)createvaluebygeneratingand harnessingeconomiesofscopeinsupplyor/andindemand;and(3) entailatechnologicalarchitecturethatismodularandcomposed ofacoreandaperiphery.
The reason the new conceptualization specifies that the platformfederatesandcoordinates(asopposedtosimply “coordi-nates”)itsagentsisbecauseitrecognizesthatneithertheexistence northeprocessoffederationofcomplementorsintoacollectivecan betakenforgranted,especiallyinthecontextofindustry ecosys-tems.Whilewithinfirms,andtosomeextentwithinsupply-chains, thecommonalityof objectivesamongconstitutive agents could perhaps betaken for granted, thefederation ofinnovative and autonomousagentscancertainlynotbetakenforgrantedwithin innovativeecosystems.Absent managerial hierarchyor supply-chainauthority,animportantroleforplatformswithinindustry ecosystems is precisely to ensure federation so that coordina-tionamongstagentscanhappen.Federationcannotbetakenfor granted,and,withoutfederationandwithoutcontracts,thereisno basisforcoordination.Hence,theimportanceofecosystem gover-nance(Tiwanaetal.,2010)forbuildingandsustaininglegitimacy oftheplatformleader(GawerandHenderson,2007)aswellasfor fosteringacollectiveidentityforecosystemmembers(Gawerand Phillips,2013).
Thisconceptualizationistheoreticallyconsistentwithboththe economicperspectiveandtheengineeringviewperspective.Itis consistent withthe engineering design perspective in that the conditionofmodulararchitectureandthecore-periphery struc-turearemaintainedthroughoutallcategoriesofplatforms.With regardtotheeconomicperspective, thisconceptualization con-siderstheperspectiveofplatformsasdouble-sidedmarketsasan importantspecialcaseofindustryplatforms,oneinwhichthe rela-tionshipsbetweentheplatform’s constitutiveagents arepurely transactional,andwherethepricingmechanismistheprincipal modeofcoordinationamongplatformagents.
While it builds on the previous literatures, my proposed conceptualizationofplatformsasevolvingorganizationsor meta-organizations relaxes their most problematic assumptions: in
contrastwiththeeconomicsview,theproposedconceptualization doesnotassumesthattheconstitutiveagentsoftheplatformplay afixedrole(thatofabuyer);andincontrastwiththeengineering view,itdoesnotassumethattheynecessarilyplaythefixedroleof acomplementor–nordoesitassumethattheplatforminterfaces arestable.Iproposeinsteadthattheconceptualizationofplatform acknowledges that theroles played bythe platform’s constitu-tiveagentscanevolveovertime.Withoutautonomousagentsand ecosystemgovernance,anindustryplatformisjustatechnological architecture,anagent-lessstructure.
Byconceptualizingplatformsasorganizations,Ire-introduce agencyintheconceptofplatforms,whichhaddisappearedinthe engineeringviewofplatforms,whilenotdiscardingtheimportant structuralcharacteristicoftheirarchitecture(core-periphery).By bringingtotheforetheplatform’sconstitutiveagentsandallowing themamultiplicityofmodesofinteractionthataretheoretically andempiricallyconsistentwithhowplatformscreatevalue,the frameworktakesonesteptowardsuncoveringmicro-foundations ofhowplatformsoperateandevolve.
4. Platforminnovationandcompetition
Asanillustrationofhowtousetheframeworkdetailedabove, Inowinferfromitasimplemodelofpatternsofinnovationand competitionthatcanbeassociatedwithtechnologicalplatforms, andwhichcouldbetestedbyotherscholars.
4.1. Patternsofplatforminnovationandcompetition
Theframeworkhashighlightedthatforeachtypeofplatform (internal,supply-chain,industryplatform)thereisacorresponding coherentsetofattributes(organizationalform,interfaces,setof accessiblecapabilities,governance).Ratherthanrepresentingthem asadiscretesetofrigidlydelineatedconfigurationsofattributes, onecanrepresentthemasinscribedinacontinuum(Fig.1).
Fig.1aimstorepresenttheorganizationalcontinuumof tech-nologicalplatforms,whereforeachdegreeofinterfaceopenness, thereisa correspondingorganizational form,a setofaccessible capabilities,andacorrespondingtypeofgovernance.Bycallingita continuumanddesigningavisualrepresentationofasetofparallel arrows,Iaimtoconveytheintuitionthatthereisakindoffluidity, andpossibleevolutionarypathways,betweentheseconfigurations. Toillustratehowinternalplatformscanevolvetowardsindustry platforms,considerthecaseofthehistoricalevolutionfrom com-putermainframestopersonalcomputersspanningthreedecades. Inthemid-1960s,IBM,theindustryleaderinmainframes, engag-inginaradicalredesignofmainframecomputer,createdwiththe IBMSystem/360aninternalmodularplatformforfuturefamiliesof IBMmainframes(Fisheretal.,1983).Atthattime,thespecification IBMSystem/360interfaceswereclosed,andonlyknowntoIBM engineers.ButthemodulararchitectureofSystem/360offeredthe technicalpossibilityforotherfirmstocreatemodulesthatwould “slotin”on“plug-in”tothearchitecture.Soonaftertheintroduction ofSystem/360,alargenumberofcompaniespoachedkeyIBM engi-neersandstartedtooffer“plug-compatible”peripheralsincluding diskdrives,terminals,printers,andmemorydevices(Baldwinand Clark,2000).So,inthe1970sandearly1980s,theIBMSystem/360 gave rise to“plug-compatible” products withina supply chain. WhenIBMdecidedtoenterthenewmicro-computercategorywith theIBMPCintheearly1980s,itbuiltitwithoff-theshelfpartsfrom thenewsupplychain,forexamplefromIntelandMicrosoft.
Inthemidtolate1980s,anumberoffirmsbegan commercializ-ingcopiesoftheIBMPC,andanecosystemoffirmsgrewoutsideof IBM’ssupplychain.Pushingtheiradvantage,IntelandMicrosoft recognizedthat theycouldfurtherweakenIBMbysteering the
Fig.1. Theorganizationalcontinuumoftechnologicalplatforms.
developmentofthePCarchitecturetowardsIntel’s microproces-sorsandMicrosoft’soperatingsystem.AsIBMgraduallylostcontrol overitssupplychain,thesupply-chainplatformevolvedintoan industryplatforminthe1990s,withIntelandMicrosoftseizing platformleadership(GawerandCusumano, 2002).Inparticular, IntelinnovatedonthearchitectureoftheoverallPCsystemby creatingopeninterfacesallowingfasterinterconnectionsbetween elementsofthePC,andfreelysharedtheintellectualpropertyof itsinterfaces.Intel’sprocessoforchestratingindustry-wide com-plementaryinnovationin awaythatprotected complementors’ incentiveshelpedestablishthecontinuedsupportofanecosystem offirmswhosebusinessmodelsweretiedtothenew,open‘Wintel’ (Windows+Intel)PCarchitecture,whichhadbythenbecomethe industryplatform(GawerandPhillips,2013).
Onecanusetheframeworktounpackhowinnovationand com-petitioninteractalongtheorganizationalcontinuumdescribedin Fig.1.Designdecisionsontechnologicalinterfaces,aswellas gov-ernancedecisions,canbeexpectedtohaveaneffectontheplatform agents’incentivestocollaborate,toinnovate,and/ortocompete.
Astheplatformscopebroadensfrominternaltosupply-chain toindustryplatform,accesstoinnovatingagentsandtheirdiverse capabilitiesincreases.Thisimpliesthat thepotentialfor collab-orativeinnovationisincreasedasonemoves (figuratively)from internaltosupply-chaintoindustryplatforms.
Butatthesametime,asonemovesfrominternaltosupply-chain toecosystemplatforms,thelikelihoodofcompetitionbetween con-stitutiveagents oftheplatformisalsolikelytoincrease.Thisis becausewithinfirms,whilecompetitionbetweenteamsis theo-reticallycurtailedbythemanagerialhierarchyandwithinsupply chains,competitionbetweentheplatformowneranditssuppliers isalsokeptincheckthroughappropriatecontractsthatmaintain incentives for cooperation. Within ecosystems however, agents areautonomous,andcooperationbetweenplatformowner and complementorscannotbetaken forgranted. Ecosystems’loose, unstructured relationships offer neither contractual safeguards againstopportunisticorcompetitivebehaviour,norhigh-powered incentivesforcooperation.Inaddition,asPilandCohen(2006)and Ethirajetal.(2008)haveestablished,whilemodularizationenables
performancegainsthroughinnovation,atthesametime,italso setsthestageforthosegainstobeerodedthroughcompetition andimitation.Itisthereforetobeexpectedthatcompetitionwill occuramongplatformownersandcomplementorswithinindustry ecosystems.FromthisIinferthefollowinghypotheses:
H1. Asplatforminterfacesbecomemoreopen,moreagentswill beattractedintotheplatformecosystem,andtheplatformleader willbeabletoaccessalargersetofpotentiallycomplementary innovativecapabilities.
Asanillustration,considerhowGoogle,Twitter,Flickr,Amazon, and Facebook have developed and shared Application Pro-gramming Interfaces (APIs)to encourage independentsoftware developerstoutilizetheseplatforms’webservicesandincorporate themwithintheirownplatform-complementaryinnovations.For example,asofFebruary2014,Googlehadpublished51APIs,6for almostallofGoogle’spopularconsumerproductssuchasGoogle Maps,YouTube,GoogleSearch,andmanyothers.TheseAPIsarea keyresourceforthedigitalplatforms’ecosystemdevelopers, allow-ingthemtoaccesstheplatformuserdataandbuildapplications. Theyarealsoakeyresourceforplatformownerswhothenhave accesstoexternaldevelopersandderivevaluefromtheir platform-complementaryinnovations.
H2. Whilealargeproportionoftheplatformecosystem’sagents willinnovateinwaysthatarecomplementarytotheplatform,a numberofthemwillstartinnovatinginwaysthatbecome com-petitivetotheplatform.
Asanillustration,considerhowFacebooklaunchedin2013its mobilephone“homescreen”application,FacebookHome,whichit haddeveloped usingGoogle’s Android,thusshiftingfrombeing a complementor in Google’s Android ecosystem to competing directlywithGoogleforend-users’attentionandadvertising rev-enuesonmobile.Consideralsohow,in2013,interneton-demand videostreamingserviceproviderNetflixstartedtodevelopitsown
Fig.2. Platforminnovationandcompetition.
high-quality original programming content, thereby competing withtraditionalcontentproviderssuchastelevisionnetworkHBO inrelationtowhomitwasuntilthenactingasacomplementor.7 H3. Emergenceofcompetitionfromcomplementorswilldepend onthegovernanceoftheecosystem,ascollaborativegovernance willincreasecomplementors’incentivestoinnovatein platform-enhancingways.
Inwell-governedecosystems,theplatformleaderwillseekto preservethealignment ofinterestsofecosystemmembers,and willtakecaretoprotectcomplementors’margins.Intelforexample tookparticularcaretoensurethatitscomplementorscouldremain profitablebyrefrainingtocompetedirectlywiththeminanumber ofmarkets(GawerandHenderson,2007).Conversely,Microsoft’s policyof“embraceandextend”towardsNetscapeandJavainthe mid1990s,wasallegedlyusedtoweakenanddislodge complemen-torswhowereperceivedascompetitivethreats;Microsoftargued initsdefencethatthiswasdemand-driven.
H4. Emergence ofcompetitionfrom formercomplementors is inturnlikelytocreateareactionbytheplatformleadertostart competingbackwiththeseformercomplementors-turned-rivals, eitherbyenvelopingthem,orbyclosingitstechnologicalinterface, ineffectmovingawayfrombeinganindustryplatformtowards becomingasupply-chainplatform.
Asanillustration,considerhowTwitterchangedtherulesof itsAPIandrestricteditsusein2012,henceforthpreventingusers’ Tweetsfromappearing ontherivalsocial networking platform LinkedIn(whichhadhithertobeentreatedasacomplementor),as anattempttostopfuellingthegrowthofLinkedInwithTwitter con-tent,andtocorralusersbackontoitsownsitewheretheirattention couldbemonetizedthroughadvertisingsales.8Anotherexampleis whenApplestoppedofferingGoogleMapsaspre-installed appli-cationonitsnewiPhoneiOS6in2012,followinguponGoogle’s refusaltoprovideturn-by-turnnavigationformapsontheiPhone –avaluablefeaturethatwasavailableonGoogle’sownAndroid operatingsystemforsmartphones.9
7Source:“Punchingaboveitsweight,upstartNetflixpokesatHBO”,TheNew
YorkTimes,16Feb.,2014
8Source: http://linkedinprofileservice.co/linkedin-profile/linkedin-profiles/
twitter-stops-no-longer-displays-tweets-on-linkedin-profiles/(accessed20.02.14).
9Source:
http://www.theguardian.com/technology/2013/nov/11/apple-maps-google-iphone-users.
Fig.2summarizesthesehypotheses.
Thissmallsetofhypotheses,logicallyderivedfromthe frame-workandconsistentwithanecdotalevidence,indicateoneofthe possible pathways through which platforms may evolve. They obviouslyrequireempiricaltesting,preferablyinavarietyof empir-icalsettings.Such empirical testingis outside thescopeof this articleandwouldconstituteafruitfulavenueforfurtherresearch. 5. Discussionandconclusion
5.1. Discussion
Thispapermakestwomaincontributions:tohavesummarized andbridgedthetwoprevailingconceptualizationsoftechnological platforms,andtohavedevelopedanewtheoreticalframeworkfor platforms,culminatinginanewconceptualizationofplatformsas evolvingorganizationsormeta-organizations.Buildingona classi-ficationsystemofdifferentkindsofplatforms,Ihaveproposedthat platformsoperatealonganorganizational continuum,including firms,supplychains,andindustryecosystems.Ihavethenderived hypothesesaboutpatternsofplatforminnovationandcompetition. Conceptualizingplatformsasevolvingorganizationsor meta-organizationspossessesdistinctadvantages.Itisconsistentwith existing theories from economics and engineering design, and whileithasbuiltonthepreviousliteratures,ithasrelaxedtheir mostproblematicassumptions:itdoesnotrequireustoassume thattheconstitutiveagentsoftheplatformplayafixedrole,bethat buyeroracomplementor–nordoesitassumethattheplatform interfacesarestable.Insteadthisconceptualizationacknowledges thattherolesplayedbytheplatform’sconstitutiveagentscanbe multipleandevolveovertime.Also,conceptualizingplatformsas organizationsormeta-organizationsre-introducesagencyinthe conceptofplatforms,whichhaddisappearedintheengineering view of platforms, without discarding theimportant structural characteristic oftheirarchitecture(core-periphery). Byfocusing onagents’behaviourandstructuralcharacteristics,theframework makesexplicitthemicro-foundationsofhowplatformsoperate, andbeginstoprovideaunifiedtheoreticalfoundationtohelp ana-lyzeinnovationandcompetitionwithinandacrossplatforms. 5.2. Managerialimplications
Platform leaders within ecosystems face the important and difficult taskof attractingand incentivizing a potentially limit-lessnumberofinnovativeyetautonomousagentstoactinways thatareplatform-enhancing,asopposed toplatform-indifferent or evenpossibly platform-competing.Assuch, platformleaders are required tonurture their ecosystems and cannot resort to the traditional modes of governance available within firms or supply-chains,namelymanagerialhierarchyorsuppliers–buyers contracts.Ecosystemgovernanceisthereforeessentialtoplatforms competitiveandinnovativeperformance.
ThisimplicationisconsistentwithpreviousresearchbyGawer and Cusumano (2002, 2008), Cusumano (2010), Boudreau and Hagiu (2009), and Tiwana et al. (2010), who have explored theeffectivenessofcombinationsof managerialchoicesleading firmstoobtainandsustainpositionsasplatformleaders.Future practice-relevantresearchcouldalsodevelopfurthermanagerial implicationsthatmightbenefitfirmsthataimtodethrone estab-lishedplatforms(SuarezandKirtley,2012).
5.3. Limitationsandavenuesforfurtherresearch
Theproposedframeworkconstitutesonestepinthedirection ofstrengtheningthetheoreticalfoundationsforresearchon plat-forms, andhasobviouslimitations. First,it isa theory-building
effortthat requires future systematic empirical validation. Fur-ther,itonlybeginstoexplorethecomplexpatternsofinteraction betweeninnovationandcompetitionwithinandacrossplatforms, anddoesnotprovideanswerstoanumberofimportantquestions. Forexample,howdodecisionsaboutplatformscope(suchas envel-opment)anddegreeofplatformopennessinteract?Also,whatare thedriversandconsequencesofchangesinthedegreeofopenness ofplatformsastheyevolveovertime?Inaddition,theconceptof economiesofscopeininnovationwasdiscussedonlybrieflyhere, andrequiresfurthertheoreticalelaboration.
Promisinglyhowever,theorganizationallensproposedbythis newframeworkallowsfutureresearcherstotapintothevast orga-nizationaltheory literature,and in particular on organizational evolution, to illuminate poorly understood aspects of platform dynamics.Thisopensupanimportantsetofavenuesfor future research.
Forexample,scholarscouldusetheframeworkdevelopedhere todevelophypothesesonhowplatformssetouttheirboundaries, byfollowingthesamelogicthatorganizationsusetosetouttheir organizationalboundaries–aprocessthatcanbeinterpreted dif-ferentlydependingonthetheoreticalconceptionoforganizations thatoneadopts.Onefruitfulavenuemightbeforexampletobuild onSantosandEisenhardt(2005)’scomprehensivetheoryon orga-nizationalboundaries,andapplyittoplatforms.
Anotherpromisingavenueforfurtherresearch,buildingona differentbranchoforganizationaltheory,wouldbetoconnectthe literatureonplatformstotheliteratureoninter-organizational net-workdynamics(Powelletal.,1996,2005;Uzzi,1997;Ahuja,2000; Brassetal.,2004;DhanarajandParkhe,2006;Zaheeretal.,2000)to deriveinsightsonpatternsofemergenceandevolutionofplatform ecosystemsasnetworksofinnovators.Giventhegrowing impor-tanceoftechnologicalplatforms,thedevelopmentofamoreprecise andnuancedunderstandingofplatformemergenceandevolution promisestobeafertileareaoffurtherstudy.
Acknowledgements
Financial supportfrom the EPSRCNEMODE Network+ grant onPlatforms asNew Economic Modelsin theDigital Economy isgratefullyacknowledged.IamindebtedtoMichaelCusumano, MichaelJacobides,RebeccaHenderson,John-PaulMacDuffie,Anita McGahan, Nelson Phillips, and David Bendor for helpful com-ments.PreviousversionsofthispaperwerepresentedattheDRUID SummerConference2012,theAcademyofManagementAnnual MeetinginBoston2012andtheBritishAcademyofManagement 2013.
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