Publications
Publications
- Strategic Management Journal
Entry into Platform-based Markets
By: Feng Zhu and Marco Iansiti
Abstract
This paper examines the relative importance of platform quality, indirect network effects, and consumer expectations on the success of entrants in platform-based markets. We develop a theoretical model and find that an entrant's success depends on the strength of indirect network effects and on the consumers' discount factor for future applications. We then illustrate the model's applicability by examining Xbox's entry into the video game industry. We find that Xbox had a small quality advantage over the incumbent, PlayStation 2, and the strength of indirect network effects and the consumers' discount factor, while statistically significant, fall in the region where PlayStation's position is unsustainable.
Keywords
Platform-based Markets; Winnter-take-all; First-mover Advantage; Indirect Network Effects; Video Game Industry; Quality; Network Effects; Market Entry and Exit; Technology Platform; Motion Pictures and Video Industry
Citation
Zhu, Feng, and Marco Iansiti. "Entry into Platform-based Markets." Strategic Management Journal 33, no. 1 (January 2012): 88–106.