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Keystone effect on entry into two-sided markets: An analysis of the market entry of WiMAX

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  • Kang, Jin-Su
  • Downing, Stephen

Abstract

We investigate a market entry scenario where a technologically-superior new platform may overcome its installed base disadvantage with the backing of a strong keystone species advantage within the business ecosystem, called keystone effect in this study, over an incumbent in a market that exhibits indirect network effects. The strength of the keystone species impacts the availability of complementary goods, which is a key factor for a platform to increase its installed base. This study proposes a dynamic economic model to map a market landscape that shows the internal condition (entrant's keystone effect) and external conditions (incumbent's keystone effect and indirect network effects) under which a new platform can successfully enter (i.e., maintain oligopoly or monopoly share) or fail to enter a two-sided market in a winner-take-all scenario. We then illustrate the model's applicability by examining the entry of Worldwide Interoperability for Microwave Access (WiMAX) into the global mobile telecommunications market, employing recent market data from 2009 to 2012 as well as forecast scenario data from 2010 to 2014. In both the historical data and hypothetical forecast scenario we find that WiMAX's keystone effect disadvantage and the market's indirect network effects were cumulatively strong enough to prevent the new technology standard from successfully competing with the incumbent (cellular 3G and Long Term Evolution) for oligopoly or monopoly share in the long run.

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  • Kang, Jin-Su & Downing, Stephen, 2015. "Keystone effect on entry into two-sided markets: An analysis of the market entry of WiMAX," Technological Forecasting and Social Change, Elsevier, vol. 94(C), pages 170-186.
    • Handle: RePEc:eee:tefoso:v:94:y:2015:i:c:p:170-186
    DOI: 10.1016/j.techfore.2014.09.008
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    4. Inoue, Yuki & Tsujimoto, Masaharu, 2018. "New market development of platform ecosystems: A case study of the Nintendo Wii," Technological Forecasting and Social Change, Elsevier, vol. 136(C), pages 235-253.
    5. Zhou, Yongyi & Zhang, Yulin & Goh, Mark, 2023. "Platform responses to entry in a local market with mobile providers," European Journal of Operational Research, Elsevier, vol. 309(1), pages 236-251.
    6. Nishikawa, Bruna T. & Orsato, Renato J., 2021. "Professional services in the age of platforms: Towards an analytical framework," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    7. Gomes, Leonardo Augusto de Vasconcelos & Facin, Ana Lucia Figueiredo & Salerno, Mario Sergio & Ikenami, Rodrigo Kazuo, 2018. "Unpacking the innovation ecosystem construct: Evolution, gaps and trends," Technological Forecasting and Social Change, Elsevier, vol. 136(C), pages 30-48.
    8. Jacob Hileman & Ivan Kallstenius & Tiina Häyhä & Celinda Palm & Sarah Cornell, 2020. "Keystone actors do not act alone: A business ecosystem perspective on sustainability in the global clothing industry," PLOS ONE, Public Library of Science, vol. 15(10), pages 1-17, October.
    9. Chao Zhang & Jiancheng Guan, 2017. "How to identify metaknowledge trends and features in a certain research field? Evidences from innovation and entrepreneurial ecosystem," Scientometrics, Springer;Akadémiai Kiadó, vol. 113(2), pages 1177-1197, November.
    10. Yuki Inoue & Masataka Hashimoto & Takeshi Takenaka, 2019. "Effectiveness of Ecosystem Strategies for the Sustainability of Marketplace Platform Ecosystems," Sustainability, MDPI, vol. 11(20), pages 1-33, October.
    11. Fabian Schueler & Dimitri Petrik, 2022. "Objectives of platform research: A co-citation and systematic literature review analysis," Papers 2202.08822, arXiv.org.
    12. Inoue, Yuki, 2021. "Indirect innovation management by platform ecosystem governance and positioning: Toward collective ambidexterity in the ecosystems," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    13. Silvia Blasi & Silvia Rita Sedita, 2020. "The diffusion of a policy innovation in the energy sector: evidence from the collective switching case in Europe," Industry and Innovation, Taylor & Francis Journals, vol. 27(6), pages 680-704, June.
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