Page - 87 - in Digital Entrepreneurship - Impact on Business and Society

manipulation, thesecharacteristicsmustbegivenhigh importancebecause technical changes inarchitecturemust alwaysbeapproached fromtheperspectiveofdifferent actors on the platform. Through so-called network effects, the value that the platformcreates for individual actors throughother actors is increased.This is valid for additional and existing actors (Farrell and Klemperer 2007; Katz and Shapiro 1994).Adistinction ismadebetween the same-side and cross-side network effects. Same-side network effects describe the value-added effects on the same platform side, e.g., by additional users in a social network.With cross-side network effects, on the other hand, the value-added of the platform for one side increases through additional actors on another side. This can be observed, for example, in the rela- tionship between supply and demand on eBay (Eisenmann et al. 2006). At its launch, every startup with a platform business model that builds on same-side or cross-side network effects faces a chicken-egg problem. Both users and suppliers/complementors to a platform alike do notwant to see the platform thrive because their value is increasing with every additional user. Platform companies need toestablishacriticalmass that isattractive tobothsidesof themarket (Shaprio and Varian 1999). Through the design of market interactions, platform sponsors themselves can act as supplier/complementor and thereby drastically increase the customer benefit through indirect network effects, especially in an early phase where there is still little supply on a platform.Driven by the network effect logic, the establishment of platforms in multi-sided market environments often leads to winner-takes-all situations. “Winner-takes-all” means that only one or a few platform sponsors serve anddominate amarket. Thismechanismcan, for example, be strengthened by systematic action by the platform sponsor to increase market entry barriers within the ecosystem governance dimension. Fig. 1 Three dimensions of platform control Development and Validation of Platform… 91