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The impact of openness on the market potential of multi-sided platforms: a case study of mobile payment platforms

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Journal of Information Technology

Abstract

A multi-sided platform can only succeed if a critical mass of users can join. This is a necessary, but not sufficient, condition for a platform's success. However, there is a limited understanding of the factors that contribute to reaching such critical mass. In this study we identify ways to determine the market potential of a platform and to reach critical mass. We particularly enrich past studies by exploring how the openness of a platform influences market potential. We examine openness at three levels – provider, technology, and user level – and ask the question: to what extent can opening (or closing) each level increase or decrease a platform’s market potential? The provider level recognizes the strategic involvement of key stakeholders that provide a platform. The technology level is concerned with the interoperability of a platform across different technologies. The user level relates to what extent a platform discriminates different segments of the customer base. On the basis of analytical modeling and theoretical analysis, we formulate four propositions concerning the effects of openness on platforms’ market potential. We illustrate the strength of propositions through a confirmatory case study, which is informed by five theoretically sampled cases. The cases illustrate cogently the effects of opening different levels of a multi-sided platform. In conclusion, we propose a decision model that can assist decision making concerning the opening of a platform to catalyze its growth.

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Notes

  1. We estimated 5.4 million retail clients as CIBC has about 1100 on 6200 branches (18%) and an adult population of approximately 30 million.

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Acknowledgements

We would like to thank Carsten Sørensen, Mark de Reuver, and Rahul Basole, the guest editors of the special issue on Mobile Platforms and Ecosystems and three anonymous reviewers for their constructive comments during the development of the paper. We are also grateful to Deborah Compeau for her suggestions on an earlier version of this paper. This research has been partly supported by the ESSEC Media and Entertainment Chair.

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Correspondence to Jan Ondrus.

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Ondrus, J., Gannamaneni, A. & Lyytinen, K. The impact of openness on the market potential of multi-sided platforms: a case study of mobile payment platforms. J Inf Technol 30, 260–275 (2015). https://doi.org/10.1057/jit.2015.7

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  • DOI: https://doi.org/10.1057/jit.2015.7

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