The dynamics of entry for digital platforms in two-sided markets: a multi-case study
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RESEARCH PAPER
The dynamics of entry for digital platforms in two-sided markets: a multi-case study Jørgen Veisdal 1 Received: 14 October 2019 / Accepted: 10 February 2020 # The Author(s) 2020
Abstract Motivating buyers and sellers to join an empty platform is thought to be a key challenge for firms attempting to launch digital platforms in two-sided markets. According to predictions from extant literature, ’no one joins until everyone joins’. The phenomenon is often referred to as the “chicken-and-egg problem”. This study investigates the phenomenon in an exploratory multi-case study of ten startup technology firms operating digital platforms in two-sided markets. The study finds that the firms entered their markets using a variety of strategies distinguishable by strategic, relational and temporal factors. A conceptual framework is proposed which distinguishes the firms’ strategies along these dimensions. In addition, a cross-case discussion of the dynamics of the firms’ strategies is provided. Deductively, the findings contribute to establishing an empirical grounding for predictions from extant literature. Inductively, the findings contribute preliminary managerial implications as well as propositions for further research on entry strategies for digital platforms in two-sided markets. Keywords Multi-sided platforms . Case study research . Entry . Networks & ecosystems . Business models . Strategy execution JEL classifications L86 . Information and Internet Services . Computer Software
Introduction
"We didn't have anything to offer, but at least they had a pain that was interesting enough that it should be possible to convince them” - Patrik Berglund, CEO of Xeneta Many of the largest and most influential firms in today’s economy operate digital platform businesses in two-sided markets dominated by network externalities, so-called "network effects" (Katz and Shapiro 1985; Rochet and Tirole 2003; Alt and Zimmermann 2019). Acting as intermediaries between two or more groups of participants with interdependent demands, such firms' main market function is typically
* Jørgen Veisdal [email protected] 1
Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology, Alfred Getz vei 1, 7491 Trondheim, Norway
described as the facilitation of interactions and transactions between producers of goods on one side and buyers or users on the other (e.g. Hagiu 2006; Boudreau and Jeppesen 2015). Examples of various types of platforms range from the twosided platforms of Amazon’s Marketplace (sellers and buyers), Apple and Google’s "app" stores (developers and users), services such as Airbnb (hosts and guests) and Uber (drivers and passengers) to multi-sided platforms such as those offered by Facebook, Google Search and YouTube (content providers, users and advertisers). The successful entry of a digital platform provider in a twosided market is said to rely on that firms’ provision of products and/or services which increase the platform’s attractiveness to buyers/users (
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