The Role of Indirect Network Effects in Explaining Platform Dominance in the Video Game Industry (2002-2006): A Network Perspective

Going beyond the traditional operationalization of indirect network effects as the number of complements available, this study focuses on the network positions of platforms and complementors to explain platform dominance. We use data from the U.S. home video game industry between 2002 and 2006 to test our model. While the impact of degree of linkages with complementors is not significant, our findings support that platform dominance is positively influenced by a greater variety of links with complementors and lesser degree of overlap with other platforms. We find support for the impact of complementor dominance on platform dominance and that this impact decreases with platform age. Our results have important implications for research in indirect network effects and also important managerial implications. Platform providers need to focus on making their platforms more heterogeneous and providing the third party developers with toolkits that encourage them to develop titles exclusively for a platform.

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