Openness in platform ecosystems: Innovation strategies for complementary products

Innovation strategies in complementary product markets come with a dilemma: Platform sponsors must concede third parties autonomy to innovate to make a platform successful, but a platform sponsor must also participate in the complementary product market to make the platform grow, thus acting as a competitor to third parties. We examine the performance outcomes of four innovation strategies based upon combinations of development and commercialization activities, i.e., the proprietary, outbound, inbound and third-party strategies, and their evolution over time. Data was collected from a panel of 4,857 video games for the seventh generation of video consoles in the United States. The findings contribute to research on platform strategy, open innovation, and ecosystem management by highlighting the different performance outcomes of innovation strategies that co-exist in the same platform ecosystem at the same time. The findings emphasize that decisions on appropriate innovation strategies in platform ecosystems are much more complex than they have previously been portrayed as, through the traditional dualities of open or closed, platform sponsors or third parties, or first or subsequent strategies.