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Development and competition of digital service platforms: A system dynamics approach

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  • Ruutu, Sampsa
  • Casey, Thomas
  • Kotovirta, Ville

Abstract

Digital service platforms are becoming widespread in all areas of society. One risk scenario in platform development is related to the fragmentation of development efforts and the failure to achieve a critical mass of platform users, while a second risk scenario is related to a winner-take-all situation in which one platform firm achieves a monopoly position in the market. We develop a system dynamics model of platform development that includes two competing platforms, and use the model to simulate various development paths by varying different factors that affect how resources accumulate to the platforms. Our simulation results show that delays in users' decision making can increase the likelihood of achieving critical mass. In addition, open interfaces and data transferability between platforms can accelerate platform adoption and decrease the likelihood of a winner-take-all situation. The simulation results also reveal more nuanced development paths than simple S-shaped growth because of delays in platform development and different cross-side network effects to end users and service providers.

Suggested Citation

  • Ruutu, Sampsa & Casey, Thomas & Kotovirta, Ville, 2017. "Development and competition of digital service platforms: A system dynamics approach," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 119-130.
  • Handle: RePEc:eee:tefoso:v:117:y:2017:i:c:p:119-130
    DOI: 10.1016/j.techfore.2016.12.011
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    References listed on IDEAS

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    Cited by:

    1. Wells, Peter & Wang, Xiaobei & Wang, Liqiao & Liu, Haokun & Orsato, Renato, 2020. "More friends than foes? The impact of automobility-as-a-service on the incumbent automotive industry," Technological Forecasting and Social Change, Elsevier, vol. 154(C).
    2. Garcia-Swartz, Daniel D. & Muhamedagić, Mensur & Saenz, Diana, 2019. "The role of prices and network effects in the growth of the iPhone platform," Technological Forecasting and Social Change, Elsevier, vol. 147(C), pages 110-122.
    3. Vecchio, Pasquale Del & Secundo, Giustina & Maruccia, Ylenia & Passiante, Giuseppina, 2019. "A system dynamic approach for the smart mobility of people: Implications in the age of big data," Technological Forecasting and Social Change, Elsevier, vol. 149(C).
    4. Rey-Moreno, Manuel & Medina-Molina, Cayetano, 2020. "Dual models and technological platforms for efficient management of water consumption," Technological Forecasting and Social Change, Elsevier, vol. 150(C).
    5. Barbe, Anne-Sophie & Hussler, Caroline, 2019. "“The war of the worlds won't occur”: Decentralized evaluation systems and orders of worth in market organizations of the sharing economy," Technological Forecasting and Social Change, Elsevier, vol. 143(C), pages 64-75.
    6. Basaure, Arturo & Vesselkov, Alexandr, 2018. "Internet of things (IoT) platform competition: consumer switching versus provider multihoming," 22nd ITS Biennial Conference, Seoul 2018. Beyond the boundaries: Challenges for business, policy and society 190352, International Telecommunications Society (ITS).
    7. Basaure, Arturo & Vesselkov, Alexandr & Töyli, Juuso, 2020. "Internet of things (IoT) platform competition: Consumer switching versus provider multihoming," Technovation, Elsevier, vol. 90.

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