The challenge facing incipient digital platform ecosystems

The success and proliferation of digital platforms like Uber and Amazon are increasingly inspiring entrepreneurs to build new ventures on similar lines. Despite the prominent success stories, there exists a long tail of digital platforms that fail to survive the incipient stage. In the early stages, a digital platform sponsor encounters a significant challenge in attracting the participation of consumers and autonomous third-party complementors, an essential step to build an ecosystem around the platform. The complementors are vital for the digital platform as they create complements that enhance the platform’s value to consumers but are only motivated to produce complements for a platform that offers attractive platform resources and provides access to a large base of consumers. However, with an ecosystem that is yet to emerge, the sponsors of digital platforms have few resources and avenues to attract complementors in the early stages. This challenge is further exacerbated in the digital context where the complementors and the platform sponsor are unknown to each other.

The role of platform sponsor scope in enabling digital platform ecosystem emergence

In essence, the challenge for the platform sponsor in the early stage amounts to securing the commitment and resources of complementors for a little-known entity that is yet to emerge in the form of an ecosystem. In this paper, we study the long tail of platforms in the incipient stage and demonstrate that the choice of platform sponsor scope offers a way to overcome the early-stage challenge of the emergence of digital platform ecosystems. Platform sponsor scope refers to the sponsor’s choice of value creation activities to perform internally as well as their decision rights over complements. Since both the platform sponsor and the complementors co-create value in digital platform ecosystems, an understanding of the scope of the platform sponsor vis-à-vis the complementors is fundamental for value creation as it shapes the opportunities subsequently available to complementors within the ecosystem. When such opportunities seem beneficial, the complementors and thereby consumers are attracted to participate, leading to the emergence of the digital platform ecosystem.

Overcoming the challenge through aligning scope with problem

Our theory builds on the problem-solving perspective, a strain of the knowledge-based theory of the firm, which argues that a firm can efficiently find valuable solutions to a problem when it aligns the nature of the problem and how the search for solutions is governed. In digital platform ecosystems, the problem to be solved is to find valuable complements. We develop a problem-solving perspective of the emergence of digital platform ecosystems and contend that the platform sponsor should choose their scope in alignment with the nature of the problem to find valuable complements efficiently. Such an alignment between problem and platform sponsor scope signals to complementors attractive opportunities for value co-creation and thus attracts their participation and, in turn, brings consumers to the ecosystem. Therefore, a platform sponsor can enable the emergence of digital platform ecosystems through their choice of scope in alignment with the nature of the problem.

We provide a framework for such an alignment between the scope and solution search process (Figure 1). Using a dataset of crowdfunding campaigns to raise funds to launch digital platforms, we find multiple pathways for successful ecosystem emergence comprising configurations of platform sponsor scope and problem dimensions. Specifically, we identify pathways for the successful emergence of complementary innovation ecosystems, open-source ecosystems, and information ecosystems.

Key takeaways from the study

Our paper highlights a novel set of considerations – problem and platform sponsor scope – that shifts the emphasis away from the actors (‘who’) to the problem at hand (‘what’) to explain platform ecosystem emergence, a hitherto understudied topic. Our findings thus suggest that aspiring entrepreneurs have agency in addressing this challenge and should focus on identifying the dimensions of the problem they confront and choose their scope accordingly to attract complementors and, thereby, consumers. Further, we demonstrate that multiple pathways exist for the platform sponsor to enable ecosystem emergence as long as the problem and their choice of scope are aligned. The underlying tenet is that the platform sponsor can shape attractive opportunities for the complementors when such an alignment is achieved.  

If you are interested in digital platform ecosystems as a researcher, an entrepreneur, or a manager, you may find it useful to read our full paper available at the website of Journal of Management Studies and can be accessed here.