Strategic Interactions and the Nature of Indirect Network Effects in Platform Ecosystems

Indirect network effects are a source of strategic advantage in platform ecosystems. But how do these effects play out in the strategies of platform providers and complementors, and how do they affect the functioning of platform ecosystems? We study the nature of indirect network effects in terms of how their distinct sources - innovativeness and size of the ecosystem of complements - and their combined strength - reinforcing or weakening - affect ecosystem participants' strategies. We embed these effects in a model of platform provider-complementors interactions to identify when there is alignment among ecosystem participants and when instead a trade-off between ecosystem innovativeness and size emerges, which is coupled with a tension between value co-creation and appropriation. Implications for platform competition are also discussed