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Platform competition: Strategic trade‐offs in platform markets

Author

Listed:
  • Carmelo Cennamo
  • Juan Santalo

Abstract

Because the literature on platform competition emphasizes the role of network effects, it prescribes rapidly expanding a network of platform users and complementary applications to capture entire markets. We challenge the unconditional logic of a winner‐take‐all (WTA) approach by empirically analyzing the dominant strategies used to build and position platform systems in the U.S. video game industry. We show that when platform firms pursue two popular WTA strategies concurrently and with equal intensity (growing the number and variety of applications while also securing a larger fraction of those applications with exclusivity agreements), it diminishes the benefits of each strategy to the point that it lowers platform performance. We also show that a differentiation strategy based on distinctive positioning improves a platform's performance only when a platform system is highly distinctive relative to its rivals. Our results suggest that platform competition is shaped by important strategic trade‐offs and that the WTA approach will not be universally successful. Copyright © 2013 John Wiley & Sons, Ltd.

Suggested Citation

  • Carmelo Cennamo & Juan Santalo, 2013. "Platform competition: Strategic trade‐offs in platform markets," Strategic Management Journal, Wiley Blackwell, vol. 34(11), pages 1331-1350, November.
    • Handle: RePEc:bla:stratm:v:34:y:2013:i:11:p:1331-1350
    DOI: 10.1002/smj.2066
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    1. Li, Jiatao & Surana, Ankit & Chavan, Meena & Kano, Liena & Schotter, Andreas & Chirico, Francesco, 2025. "The internationalization of digital platform-based firms: A systematic literature review and directions for future research," Journal of World Business, Elsevier, vol. 60(4).
    2. Zhi-jian Zhang & Chao-hao Li & Guang-quan Li & Ya-di Zhou & Mi-yu Wan, 2025. "Advance-selling strategies under platform competition," Australian Journal of Management, Australian School of Business, vol. 50(4), pages 1166-1186, November.
    3. Abhishek Nagaraj & Henning Piezunka, 2024. "The Divergent Effect of Competition on Platforms: Deterring Recruits, Motivating Converts," Strategy Science, INFORMS, vol. 9(3), pages 277-296, September.
    4. Tobias Pauli & Emanuel Marx & Erwin Fielt & Christian Marheine & Martin Matzner, 2025. "Inhibitors and Enablers of Leverage in Digital Industrial Platform Ecosystems," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 67(5), pages 711-731, October.
    5. Chiara Farronato & Jessica Fong & Andrey Fradkin, 2024. "Dog Eat Dog: Balancing Network Effects and Differentiation in a Digital Platform Merger," Management Science, INFORMS, vol. 70(1), pages 464-483, January.
    6. Sun, Yiwen & Pinkse, Jonatan & Bleda, Mercedes, 2025. "Social media platforms' use of nonmarket strategy to manage politically contentious issues in host countries: The case of TikTok in the US market," Journal of International Management, Elsevier, vol. 31(6).
    7. Joe Cox & Paul Crosby & Jordi McKenzie, 2023. "Don’t Look Back? Backward Compatibility in the Video Gaming Industry," Strategy Science, INFORMS, vol. 8(3), pages 387-404, September.
    8. Shekhar, Shiva & Shopova, Radostina, 2025. "The limits of media see-saws: Ad-funded platform mergers can harm both sides," Economics Letters, Elsevier, vol. 254(C).
    9. Elias Carroni & Leonardo Madio & Shiva Shekhar, 2024. "Superstar Exclusivity in Two-Sided Markets," Management Science, INFORMS, vol. 70(2), pages 991-1011, February.
    10. Sali Li & Maximilian Stallkamp & Noman Shaheer & Liang Chen, 2025. "Multinational platforms and legitimacy spillovers," Asia Pacific Journal of Management, Springer, vol. 42(4), pages 2151-2170, December.
    11. Vladimir C. M. Sobota & Mark de Reuver & Amir Pooyan Afghari & Geerten van de Kaa, 2026. "Strategic openness: Category variety, boundary resources, and exclusive content as drivers of complementor participation," Electronic Markets, Springer;IIM University of St. Gallen, vol. 36(1), pages 1-19, December.
    12. Anil R. Doshi & William Schmidt, 2024. "Soft Governance Across Digital Platforms Using Transparency," Strategy Science, INFORMS, vol. 9(2), pages 185-204, June.
    13. Jonathan Lautenschlager & Jan Stramm & Tobias Guggenberger & Nils Urbach, 2025. "Striking a balance: Designing a blockchain-based solution to navigate coopetition dynamics in supply chain management," Electronic Markets, Springer;IIM University of St. Gallen, vol. 35(1), pages 1-24, December.
    14. Aparajita Agarwal & Valentina A. Assenova, 2024. "Mobile Money as a Stepping Stone to Financial Inclusion: How Digital Multisided Platforms Fill Institutional Voids," Organization Science, INFORMS, vol. 35(3), pages 769-787, May.
    15. Jin Jiang & Yuanyuan Dang & Shanshan Guo & Yuxin Sun & Wenhui Zhou, 2025. "Construction of doctors’ reputation systems in online health services: The combination of online and offline mechanisms," Electronic Markets, Springer;IIM University of St. Gallen, vol. 35(1), pages 1-21, December.
    16. Maximilian Julius Krome, 2025. "Ecosystem Selection Criteria and Implications: A Conjoint Experiment of Ecosystem Partners’ Decision-Making," Schmalenbach Journal of Business Research, Springer, vol. 77(4), pages 1101-1139, December.
    17. Huang, Jinglei & Xie, Danxia, 2025. "“Platform Holdup” and Platform Regulation," International Review of Law and Economics, Elsevier, vol. 83(C).

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