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Entry into platform‐based markets

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  • Feng Zhu
  • 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 2's position is unsustainable. Copyright © 2011 John Wiley & Sons, Ltd.

Suggested Citation

  • Feng Zhu & Marco Iansiti, 2012. "Entry into platform‐based markets," Strategic Management Journal, Wiley Blackwell, vol. 33(1), pages 88-106, January.
    • Handle: RePEc:bla:stratm:v:33:y:2012:i:1:p:88-106
    DOI: 10.1002/smj.941
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