Chapter 6: Opening Platforms: How, When and Why?
6. Opening platforms: how, when and why? Thomas R. Eisenmann, Geoffrey Parker and Marshall Van Alstyne INTRODUCTION Selecting optimal levels of openness is crucial for firms that create and maintain platforms (Gawer and Cusumano, 2002; West, 2003; Gawer and Henderson, 2007; Boudreau, 2008; Eisenmann, 2008; Parker and Van Alstyne, 2008). Decisions to open a platform entail tradeoffs between adoption and appropriability (West, 2003). Opening a platform can spur adoption by harnessing network effects, reducing users’ concerns about lock-in, and stimulating production of differentiated goods that meet the needs of user segments. At the same time, opening a platform typically reduces users’ switching costs and increases competition among platform providers, making it more difficult for them to appropriate rents from the platform. In this chapter, we review research on factors that motivate managers to open or close mature platforms. We focus on a subset of platforms: those that exploit network effects by mediating transactions between platform users (Eisenmann et al., 2006; Evans et al., 2006; Evans and Schmalensee, 2007). Our inquiry excludes platforms that do not mediate network transactions but instead enable a firm to offer product variety by sharing common components (as with Chrysler’s K-car or Boeing’s 777). A platform is ‘open’ to the extent that: (1) restrictions are not placed on participation in its development, commercialization or use; and (2) any restrictions – for example, requirements to conform with technical standards or pay licensing fees – are reasonable and non-discriminatory, that is, they are applied uniformly to all potential platform participants....
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