How do entrepreneurs create indirect network effects on digital platforms? A study on a multi-sided gaming platform

ABSTRACT

Digital platforms play a central role in today’s market-based competition. To build a successful platform, entrepreneurs must pursue indirect network effects and shape multiple sides of the platform. However, the extant literature provides only a meager understanding of how entrepreneurs can create such indirect network effects. To better understand how this can be done, we conduct a case study that longitudinally traces 16 years of digital game platform growth as the entrepreneurs bring the platform successfully into multiple markets. The analysis advances theorising of the entrepreneurs’ repertoires of moves seeking to increase the number and variety of platform participants conducive to creating indirect network effects. The findings indicate that early moves focus on creating technical solutions that overcome technical challenges and permit platform scaling, whereas later moves seek to create a more flexible and generalisable platform architecture that allows a wider range of interactions. The findings make several contributions to the digital entrepreneurship literature by synthesising a dynamic model of entrepreneurs’ repertoire of competitive moves that will induce indirect network effects.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The term ‘bind’ or ‘binding’ refers to different options for building the platform stack. Different bindings are based on interfaces between different layers of a multi-layered architecture.

2 This study covers the years 2000–2015 as there was a huge change in G-cluster’s business model and operation logic in 2016. After G-cluster developed a successful working cloud gaming solution and proved its operability, the firm focused on (almost solely) developing cloud gaming technology and licensing it to large well-known brands in the gaming industry.

3 We cannot show use numbers because of confidentiality agreements. Note that all games are not available across all channels. Many games are country-specific (e.g., targeted to Japanese players) or have geographic limitations for supply purposes because of licensing arrangements.

Additional information

Notes on contributors

Arto Ojala

Arto Ojala is a professor of International Business at University of Vaasa, Finland. He is also Adjunct Professor in Knowledge Management at the Tampere University. Ojala’s research is at the cross-section of entrepreneurship, international business, and information systems. His articles have been published in Journal of Small Business Management, Journal of World Business, International Business Review, Journal of International Marketing, International Marketing Review, Information Systems Journal, among others. Ojala has a PhD in economics from the University of Jyväskylä.

Kalle Lyytinen

Kalle Lyytinen (PhD, Computer Science, University of Jyväskylä, Dr h. c. mult) is Distinguished Professor at Case Western Reserve University. He is among the top scholars in terms of his h-index (93) and is the LEO Award recipient (2013). He has published 400 articles and edited or written over 30 books or special issues. His research focuses on the nature, dynamics, and organization of digital innovation, design work, requirements in large systems, and digital infrastructures.