Incorporating Network Effects in Industry-Wide Platform Strategy Making

Abstract

The logic of platform strategy that contributed to the success of walkman or power tool needs to be reexamined when the product is modularized, interfaces are standardized, and derived products are developed and marketed by a group of technologically and commercially interdependent firms. In such context, direct and indirect network effects affect the success of industry-wide platform strategy. In this article, the authors try to synthesize theories of modularity and network economics to provide a theoretical framework to rejuvenate the platform strategy in the modern network context.