Platform competition and strategic trade‐offs for complementors: Heterogeneous reactions to the entry of a new platform
When a rival platform enters, resource-poor complementors defect toward it while network-effect-dependent complementors stay and cooperate more with the incumbent.
Summary
The study looks at how game developers reacted when Epic Games entered PC game distribution, which Steam had dominated. Entry created two opposing pressures for complementors: a fragmented user base that weakens indirect network benefits, and an escape from the intense competition inside the incumbent platform. Independent developers with fewer strategic resources were more likely to sell on both platforms and became less responsive to the incumbent's attempts to coordinate collective action such as sales promotions. Multiplayer developers, whose products depend on network effects, were less likely to multihome and more responsive to the incumbent's orchestration. For platform owners, complementors will not react uniformly to a rival's entry, and network effects are what keep the most dependent ones loyal.
Editor's opinion
When a rival platform arrives, the incumbent's ecosystem does not defect as one. The weakest complementors leave first and resist the platform's collective initiatives, while those whose products depend on network effects stay and cooperate more. An incumbent should expect its smaller, resource-poor partners to be the ones at risk, and rely on network effects more than on incentives to hold its core.
Key concepts
platform competition · complementors · multihoming · network effects · orchestration