Platform Strategy: Managing Ecosystem Value Through Selective Promotion of Complements

Abstract

Platform sponsors typically have both incentive and opportunity to manage the overall value of their ecosystems. Through selective promotion, a platform sponsor can reward successful complements, bring attention to underappreciated complements, and influence the consumer’s perception of the ecosystem’s depth and breadth. It can use promotion to induce and reward loyalty of powerful complement producers, and it can time such promotion to both boost sales during slow periods and reduce competitive interactions between complements. We develop arguments about whether and when a platform sponsor will selectively promote individual complements, and test these arguments on data from the console video game industry in the United Kingdom. We find that platform sponsors do not simply promote “best in class” complements; they strategically invest in complements in ways that address complex tradeoffs in ecosystem value. Our arguments and results build significant new theory that helps us understand how a platform sponsor orchestrates value creation in the overall ecosystem.