Beyond the N in Network Effects: Five Type of Network Externality Functions in Platform Markets

Karhu, Kimmo; Heiskala, Mikko; Ritala, Paavo

doi:10.2139/ssrn.3593600

Cited by 1 publication

(6 citation statements)

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“…In previous studies, scholars have primarily investigated established platform firms like Google, Amazon, Facebook, etc., within relatively short time windows (Gawer and Cusumano 2008;Parker, Alstyne, and Choudary 2016) and explained retrospectively how indirect network effects emerged (Evans and Schmalensee 2016;Rochet and Tirole 2003). Most of these works focus on the number of participants as the main driver of indirect network effects (Afuah 2013;Karhu, Heiskala, and Ritala 2020). In contrast, this study offers a more nuanced analysis of how entrepreneurs create various value-creation mechanisms that can promote indirect network effects.…”

Section: Discussionmentioning

confidence: 91%

“…Because of the different natures and complexity of these interdependencies, scholars have suggested that several factors shape indirect effects (Afuah 2013;Karhu, Heiskala, and Ritala 2020). We identify four such factors.…”

Section: Introductionmentioning

confidence: 99%

“…In practice, creating and orchestrating indirect network effects has remained a challenging proposition Choudary 2016, 2017;Pellizzoni, Trabucchi, and Buganza 2019;Tura, The value of indirect effects for participants does not result solely from the number of users on each side but also from how much participants on each side add value in a variety of complementarities on the other side (Afuah 2013;Karhu, Heiskala, and Ritala 2020).…”

Section: Introductionmentioning

confidence: 99%

“…Third, skewed pricing structures may be needed to support one side in growing a large enough participant pool (Armstrong 2006;Rochet and Tirole 2003). Fourth, complex dependencies among other components on the same or different sides help create cross-side value (Evans 2009;Karhu, Heiskala, and Ritala 2020).…”

Section: Introductionmentioning

confidence: 99%

“…Parker, Alstyne, and Jiang 2017). To wit, most studies have not probed the origins and logic of creating indirect effects, but instead have mainly focused on the number of users on either side (Karhu, Heiskala, and Ritala 2020;Trabucchi, Buganza, and Verganti 2021). Fourth, previous analyses have examined well-established, successful platforms (Boudreau 2012;Karhu, Gustafsson, and Lyytinen 2018;Parker, Alstyne, and Choudary 2016).…”

Section: Introductionmentioning

confidence: 99%

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How do entrepreneurs create indirect network effects on digital platforms? A study on a multi-sided gaming platform

Ojala

Lyytinen

2022

Technology Analysis & Strategic Management

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Digital platforms play a central role in today's market-based competition. To build a successful platform, entrepreneurs must pursue indirect network effects and shape multiple sides of the platform. However, the extant literature provides only a meager understanding of how entrepreneurs can create such indirect network effects. To better understand how this can be done, we conduct a case study that longitudinally traces 16 years of digital game platform growth as the entrepreneurs bring the platform successfully into multiple markets. The analysis advances theorising of the entrepreneurs' repertoires of moves seeking to increase the number and variety of platform participants conducive to creating indirect network effects. The findings indicate that early moves focus on creating technical solutions that overcome technical challenges and permit platform scaling, whereas later moves seek to create a more flexible and generalisable platform architecture that allows a wider range of interactions. The findings make several contributions to the digital entrepreneurship literature by synthesising a dynamic model of entrepreneurs' repertoire of competitive moves that will induce indirect network effects.

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Section: Discussionmentioning

confidence: 91%

Section: Introductionmentioning

confidence: 99%