Indirect Network Effects and Platform Dominance in the Video Game Industry: A Network Perspective

Going beyond the traditional conceptualization of indirect network effects as the number of complements available, this study analyzes how the network positions of platforms and complementors explain platform dominance. We use data from the U.S. home video game industry between 2002 and 2006 to test our model of platform dominance. While the impact of degree of links with complementors representing the number of complements is significant, our study also finds that platform dominance is positively influenced by support from a greater breadth of titles by complementors and lesser degree of overlap with other platforms. We also find that ties with high-status complementors influence platform dominance, but this impact decreases with platform age. Our results suggest benefits to refine our conceptualization of indirect network effects from a network perspective. The managerial implications are that each platform provider needs to differentiate its platform by attracting high-status developers and by providing third-party developers with toolkits that encourage them to develop exclusive titles.