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

Abstract

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.

Network effects—do they matter for digital technologies diffusion?

“…So far, the empirical evidence at the macro-level regarding the emergence of network externalities in telecommunication markets is poor; hence, the research gap--in terms of empirical evidence-is easily traceable. Some past evidence may be found in Chen et al (2019), Tucker (2019, Kumar et al (2021), Ojala and Lyytinen (2022), Prasetio (2022), Weiergraeber (2022), Cosnita-Langlais andRasch (2023) or Xu et al (2023); however, in any of these works, we find evidence associated with network effects as a driver of mobile cellular telephony diffusion on telecommunication markets. The existing empirical evidence strictly related to the process of mobile cellular telephony diffusion in the context of network effects on the macro-level is relatively outdated, since it may be traced in the works of, for example, JOCM 36,5 Arroyo-Barrig€ uete et al (2010), Baraldi (2012), Kiiski and Pohjola (2002), Arroyo-Barrig€ uete et al (2010), Grajek (2010), Grajek and Kretschmer (2012), and Lechman (2017Lechman ( , 2018Lechman ( , 2019.…”

“…(2019), Tucker (2019), Kumar et al . (2021), Ojala and Lyytinen (2022), Prasetio (2022), Weiergraeber (2022), Cosnita-Langlais and Rasch (2023) or Xu et al . (2023); however, in any of these works, we find evidence associated with network effects as a driver of mobile cellular telephony diffusion on telecommunication markets.…”

Characteristics of digital artifacts in international endeavors of digital‐based international new ventures

“…For instance, gaming platform provider G-cluster tried several technologies and market segments before it successfully launched its service (Ojala, 2016;Ojala & Lyytinen, 2022).…”

“…Usage can also be blocked if the company developing a device or a platform wants to prevent other firms from adding digital content to their device or platform. However, entrepreneurs generally prefer their digital artifacts to be capable of being multihomed , that is, to be compatible with several devices (Anderson et al, 2014; Ojala & Lyytinen, 2022). Multihoming facilitates global connectivity by integrating a digital service with new devices used or developed in areas with different regional standards to those where the service originates.…”

“…Multihoming facilitates global connectivity by integrating a digital service with new devices used or developed in areas with different regional standards to those where the service originates. However, there might also be technological limitations in certain markets, such as incompatibility with different technologies, standards, and digital artifacts (Ojala & Lyytinen, 2022), that limit the use of product agnostic features. Some countries or firms might also have regulations or patents limiting access to certain technologies.…”