Participation in a Platform Ecosystem: Appropriability, Competition,andAccess to the Installed Base

Abstract

In this study we examine the antecedents of small independent software vendor (ISV) decisions to join a platform ecosystem. Using data on the history of partnering activities from 1201 ISVs from 1996 to 2004, we find that appropriability strategies based on intellectual property rights and the possession of downstream complementary capabilities by ISVs are positively related to partnership formation, and ISVs use these two mechanisms as substitutes to prevent expropriation by the platform owner. In addition, we show that greater competition in downstream product markets between the ISV and the platform owner is associated with a lower likelihood of partnership formation, while the platform's penetration into the ISV's target industries is positively associated with the propensity to partner. The results highlight the role of innovation appropriation, downstream complementary capabilities, and collaborative competition in the formation of a platform ecosystem.