Research on Growth Mechanism of Platform Ecosystem

Abstract

The smart-revolution restructured the previous industrial organization and started the new ICT ecosystem, which consists of four layers: content, platform, network, and device (represented by the acronym C-P-N-D). Recently, platform providers (PPs) have been increasing their value by being the intermediary between content providers (CPs) and users. However, as the platform ecosystem grows in size, the likelihood of unfair contracting between PPs and CPs may increase. This sudden growth of the platform ecosystem may cause problems of platform openness. In addition, giant platforms may cause CPs to seek only short-term profits by discouraging them from retaining their uniqueness. This problem is further amplified by the users when they stop exploring for specific content or information that they want. The negative feedback caused by the phenomena could greatly reduce content diversity and limit the users choice of content. Finally, the lack of idea pools would hinder CPs from coming out with creative content, which is the energy for sustaining the growth of a platform ecosystem. Most studies hitherto have focused on individual actors strategy, but little effort has been put into trying to understand the growth mechanism of the platform ecosystem and the role that PPs play in platform openness, especially with regard to diversity and creativity of CPs. This dissertation aims to find the mechanism of sustainable growth of a platform ecosystem and suggest the framework for platform ecosystem dynamics by examining three studies used to theoretically and empirically verify the hypotheses introduced in this dissertation. Chapter 3 focused on the relationship between platform openness and productivity of CPs using stochastic frontier analysis and meta-frontier analysis. By comparing two representative open and closed platform ecosystems, the analysis helped to figured out how platform openness, as the degree of strictness in content selection, influences the productivity of CPs. The results indicate that the closed platform ecosystem achieves a higher average efficiency within the ecosystem than the open platform

however, the open platform achieves a higher efficiency than the closed platform in terms of meta-frontier. This means that platform openness may help CPs achieve higher efficiency in the long run. Chapter 4 focused on the influence of giant platforms on content diversity and how the study found the evolutionary mechanism of platform ecosystems by using a simulation. The major findings are as follows. First, the users active will to find alternative sources of content may aid in the recovery of decreased content diversity. Second, the ratio of CPs that retain their uniqueness of content to all CPs is positively correlated with internal diversity. When consumers start actively trying to find their hidden needs by diversifying their source of information, CPs may also try harder to meet the users hidden needs by retaining their uniqueness. Third, high content diversity influences the increasing peak point of average performance of the whole platform ecosystem. In other words, content diversity is the source of creativity, which is an important factor for a platform ecosystem to grow sustainably. Chapter 5 focused on the co-evolution and evolutionary trajectory of a platform ecosystem. The analysis was conducted by drawing a map of the platform ecosystem network based on consumer preference in Korea from 2010 to 2013. By considering the characteristics of each years network topology and analyzing the changing trends of each nodes centralities, network evolution can be understood. The result of the experiments supported a conclusion that the platform ecosystem evolved from PP and CPs effort to adopt the shaken technological environment and users selection. In addition, each user had not only formed a distinctive media repertoire, but the media repertories also contained a great deal of similarities as well. These similar repertories can be grouped into several communities. Therefore, in order to create value in the platform ecosystem, PP, CPs, and even users need to cooperate with each other. Through three studies, this thesis suggests the sustainable growth mechanism of a platform ecosystem. As a platform opens the selection process, internal content diversity can be maintained and enable CPs to achieve long-term efficiency. Internal content diversity raises the probability of creating innovation which could meet the consumers hidden needs, thereby providing energy to the whole ecosystem. In addition, openness of a platform influences the CPs will to retain uniqueness of content indirectly and this willingness increases content diversity. Also the users will may increase the diversity of their source of information, and their repertoire plays a significant role in increasing internal content diversity. All of these processes are interdependent among the PPs, CPs, and users. Therefore, to achieve sustainable growth of a platform ecosystem, we need a holistic view of promoting the actors will and creating an environment where the value of creativity is appreciated. This thesis gives several managerial and policy implications. First, PPs should open their platforms technologically and compatibly. The selection process of CPs has driven long-term efficiency of their ecosystem. Second, content and application service providers need to focus on retaining their own uniqueness and increase their market power from the initial phase. Governments should also encourage CPs to create new content, which is the energy of growing a platform ecosystem by creating a failure-friendly atmosphere. This thesis proposes a new theory of the platform ecosystem dynamics academically and provides the philosophical base of public policy and strategy of firms by understanding the value of creativity and diversity for sustainable growth of the platform ecosystem.