Platforms, Markets and Innovation

Platforms, Markets and Innovation

Edited by Annabelle Gawer

Annabelle Gawer presents cutting-edge contributions from 24 top international scholars from 19 universities across Europe, the USA and Asia, from the disciplines of strategy, economics, innovation, organization studies and knowledge management. The novel insights assembled in this volume constitute a fundamental step towards an empirically based, nuanced understanding of the nature of platforms and the implications they hold for the evolution of industrial innovation. The book provides an overview of platforms and discusses governance, management, design and knowledge issues.

Chapter 4: The Role of Services in Platform Markets

Fernando F. Suarez and Michael A Cusumano

Subjects: business and management, strategic management, economics and finance, economics of innovation, industrial organisation, services, innovation and technology, economics of innovation


4. The role of services in platform markets Fernando F. Suarez and Michael A. Cusumano INTRODUCTION Numerous factors affect the emergence of a successful platform among competing alternatives. Some of these influences can be very idiosyncratic or platform-specific, although most studies agree on the critical role of the following four factors: (a) adequate pricing strategies to generate momentum behind a platform – e.g. subsidizing one ‘side’ of the platform as console makers do in the videogames industry (Eisenmann, 2005); (b) having a large set of complementary products that increase the value of a particular platform – for example, a wider array of games for a given console (Gawer and Cusumano, 2002); (c) the strength of ‘network effects’ that often tilt the balance in favor of platforms that can build their installed base faster than competitors – e.g. the reason why platforms such as VHS as well as MS-DOS and then Windows and Office have been so successful (Katz and Shapiro, 1988); and (d) technological or design advantages – i.e. the possibility that one platform may achieve a high level of differentiation over competitors, for instance due to technological superiority (Suarez and Utterback, 1995). Other factors sometimes mentioned in explaining platform outcomes include the role of market momentum and ‘mind share’ (e.g. the ‘buzz’ that Apple or Google generates before the launch of new products) and government regulation (Gawer and Cusumano, 2008). However, these factors seem to be a common denominator in most of the platform studies with which we are familiar. Most of the...

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