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Digital platforms can be opened in two ways to promote innovation and value generation. A platform owner can open access for third-party participants by establishing boundary resources, such as APIs and an app store, to allow complements to be developed and shared for the platform. Furthermore, to foster cooperation with the complementors, the platform owner can use an open-source license boundary resource to open and share the platform’s core resources. However, openness that is too wide renders the platform and its shared resources vulnerable to strategic exploitation. To our knowledge, platform strategies that promote such negative outcomes have remained unexplored in past research. We identify and analyze a prominent form of strategic exploitation called platform forking in which a hostile firm, i.e., a forker, bypasses the host’s controlling boundary resources and exploits the platform’s shared resources, core and complements, to create a competing platform business. We investigate platform forking on Google’s Android platform, a successful open digital platform, by analyzing the fate of five Android forks and related exploitative activities. We observe several strategies that illustrate alternative ways of bundling a platform fork from a set of host, forker, and other resources. We also scrutinize Google’s responses, which modified Android’s boundary resources to curb exploitation and retain control. In this paper, we make two contributions. First, we present a theorization of the competitive advantage of open digital platforms and specifically expose platform forking as an exploitative and competitive platform strategy. Second, we extend platform governance literature by showing how boundary resources, which are mainly viewed as cooperative governance mechanisms, are also used to combat platform forking and thus sustain a platform’s competitive advantage.

Because the literature on platform competition emphasizes the role of network effects, it prescribes rapidly expanding a network of platform users and complementary applications to capture entire markets. We challenge the unconditional logic of a winner-take-all (WTA) approach by empirically analyzing the dominant strategies used to build and position platform systems in the U.S. video game industry. We show that when platform firms pursue two popular WTA strategies concurrently and with equal intensity (growing the number and variety of applications while also securing a larger fraction of those applications with exclusivity agreements), it diminishes the benefits of each strategy to the point that it lowers platform performance. We also show that a differentiation strategy based on distinctive positioning improves a platform's performance only when a platform system is highly distinctive relative to its rivals. Our results suggest that platform competition is shaped by important strategic trade-offs and that the WTA approach will not be universally successful.

We study price competition and entry of platforms in multi-sided markets. Utilizing the simplicity of the equilibrium pricing formula in our setting with heterogeneity of customers’ membership benefits, we demonstrate that in the presence of externalities, the standard effects of competition can be reversed: as platform competition increases, prices, and platform profits can go up and consumer surplus can go down. We identify economic forces that jointly determine the social inefficiency of the free-entry equilibrium and provide conditions under which free entry is socially excessive as well as an example in which free entry is socially insufficient.

Exclusive digital services are increasingly prevalent on growing digital service platforms. This study explores the optimal exclusivity strategy for digital service developers and examines the negotiation of licensing fees in exclusive agreements between developers and platforms. We develop a game-theoretic model in which a developer offers a digital service to consumers through competing platforms, one of which is superior in terms of installed base and bargaining power in negotiations with the developer. One interesting finding is that the inferior platform may pay a lower licensing fee to the developer than the superior platform when the difference in their installed bases is small. As the superior platform's installed base grows, its equilibrium licensing fee increases if its bargaining power is low but decreases if it is high. Furthermore, our analysis reveals that exclusivity on the superior platform is more profitable for the developer when the inferior platform's installed base is sufficiently small. Conversely, when the inferior platform's installed base is large, the developer prefers exclusivity on the inferior platform if the number of new consumers is sufficiently large, and non-exclusivity otherwise. Finally, we find that consumer surplus is always highest under the non-exclusivity strategy, while social welfare reaches its maximum under the non-exclusivity strategy only when the platform with lower intrinsic value has a sufficiently large installed base.

Strategy scholars have documented in various empirical settings that firms seek and leverage stronger institutions to mitigate hazards and gain competitive advantage. In this paper, we argue that such “institution-seeking” behavior may not be confined to the pursuit of strong institutions: firms may also seek weak institutions to mitigate hazards. Using panel data from the global smartphone industry and recent patent wars among key industry rivals, we examine how smartphone vendors that are not directly involved in patent litigation strategically respond to increased litigation risks in this industry. We find that as patent wars intensify, smartphone vendors not involved in any litigation focus more of their business in markets with weaker intellectual property (IP) protection because of institutional arbitrage opportunities. This strategic response is more pronounced for vendors whose stocks of patents are small and whose home markets have weak-IP systems. Our study is the first to examine the relationship between heterogeneity in national patent systems and firms’ global strategies. It provides a more balanced view of firms’ institution-seeking behavior by documenting how they make strategic use of weaker institutions.

Platforms are increasingly adopting membership bundling strategies to strengthen competitiveness. This paper explores how duopoly platforms bundle their membership services (the base products) with those provided by other platforms (add-ons) through a game-theoretic lens. We focus on the competing platforms’ strategic decisions to bundle different add-ons together or separately by examining three key determinants: the quality gap between the base products, the quality of versus consumer preference for the add-ons, and the profit-sharing ratio to partners who offer the add-ons. First, with comparable base-good qualities, symmetric bundling emerges in equilibrium. Specifically, simultaneously bundling add-ons together (or separately) dominates when the add-on quality (or the consumers’ preference) mainly drives purchase. Second, significant quality disparity in the base goods leads to asymmetric equilibria: the high-quality platform strategically selects the bundling mode, together or separately, that minimizes the profit-sharing payouts, forcing the low-quality rival to adopt a different strategy. Finally, when the base goods have similar quality, the platform competition can largely yield optimal welfare outcomes. With a significant quality disparity, however, the equilibrium strategies may deviate from social efficiency. Our study advances understanding of platform competition with membership bundling and offers regulatory insights for social planners to strategically intervene in platforms’ membership bundling decisions.

Purpose The integration of e-commerce platforms and artificial intelligence (AI) into the marketing channel ecosystem is challenging the explanatory capacity of traditional channel power theories, indicating a significant yet unaddressed research gap concerning the impact of these digital entities and AI on channel power exercise dynamics. This study adopts a contingency perspective to critically revisit how e-commerce platforms exercise channel power and the ensuing effects on channel conflicts. The purpose of this study is to extend the boundaries of traditional channel power theories, enhancing their relevance in today’s digital marketplace. Design/methodology/approach Building on channel power theories, the authors developed a framework tested with survey data collected from 262 sellers. This framework incorporates three key contingent variables: inter-platform competition, AI capabilities and platform value co-creation. Regression analysis was used to perform the analyses. Findings This study finds that intense inter-platform competition mitigates the (positive) negative relationship between platform channel power and the exercise of (non-) coercive power. Moreover, a platform’s AI capabilities and value co-creation activities diminish the potential for channel conflicts induced by the exercise of coercive power. AI capabilities can also strengthen the negative relationship between the exercise of non-coercive power and channel conflicts. Originality/value This study contributes to the advancement of traditional channel power theories by integrating contemporary digital elements like AI and platform dynamics. This study provides theoretical and practical insights on navigating channel power in modern marketing environments, offering strategic guidelines for optimizing channel relationships.

Two-sided platforms enable and supplement transactions between buyers and sellers. We consider a decision problem facing two such platform firms competing in a market. Each firm needs to divide its budget of a planning period between promotion towards attracting new sellers and new buyers. We propose a generalized Nash equilibrium problem (GNEP) model to find optimal allocations. The GNEP approach provides an eloquent framework for analysis and theory development. An intuitive result from the interpretation of optimality conditions is that a firm’s focus should be higher towards the group whose presence is less on the platform. This focus can shift depending on competitors’ ability to dissuade new customers. Interestingly, the model recommends that a firm should focus on getting new sellers when its customer-focused promotion adversely impacts competitors’ customer acquisition. Predatory promotion strategy adversely affects both. More useful implications can be drawn from the equilibrium analysis. We have assumed that a limited number of sellers are available in the market, whereas no restrictions are imposed on new customer acquisitions. This situation is typical during the entry phase of a two-sided platform.

Content platforms suffer from declining subscriber growth. To address this issue, we examine an interesting strategy that competing platforms jointly launch a membership bundle, which provides consumers with simultaneous access to them at a reduced price. We investigate how the bundle approach interacts with first-party content production in shaping platforms’ pricing and content-sharing decisions. By solving a game-theoretical model, we illustrate that: first, competing platforms offer the bundle only when they are less differentiated. Second, in stark contrast with the consequence of keeping the content exclusive without the bundle, the platform is more likely to share its content with the membership bundle. Third, despite the exclusivity of first-party content, with the membership bundle, the rival platform may generate higher profit instead of always being harmed without the bundle. We enrich the understanding of how platform coopetition interacts with first-party content production and draw practical implications for platform owners.

PurposeThe study aims to analyze factors impacting firms’ success and persistence in a digital platform competition using the structure-conduct-performance (SCP) framework. The study also includes real-life cases that are beneficial to academicians and practitioners to understand and develop strategies for success and persistence during uncertainty.Design/methodology/approachA literature review to identify the factors that impact success and persistence in a digital platform competition was conducted following Webster and Watson (2002). Findings were integrated into a SCP framework to examine and understand the identified factors’ relational impact.FindingsWhile analyzing factors under the SCP framework, all factors were divided into three categories: those impacting positively, those impacting negatively and those with ambiguous impact on the success and persistence in digital platform competition. Digital platform firms can exploit the positively impacting factors to increase market share by being distinctive from other digital platform firms and becoming dominant by withstanding competition. On the other hand, negatively impacting factors increase barriers to entry, intensify competition and reduce the distinctiveness of digital platform firms. Lastly, a few factors may have either a positive or a negative impact depending upon the particular characteristics of the firm/industry.Research limitations/implicationsThe study opens the scope for future research on empirically testing the developed conceptual framework and relationships by developing propositions to posit the possible impact of these factors on digital platforms’ success and persistence.Originality/valueThe study contributed to the existing literature by using SCP framework to analyze the factors affecting firm’s success and persistence in a digital platform competition. Also, the study has discussed the relational impact of factors rather than their impact in isolation.