Abstract

http://ssrn.com/abstract=1496336
 
 

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Platform Envelopment


Thomas R. Eisenmann


Harvard University - Entrepreneurial Management Unit

Geoffrey Parker


Tulane University - A.B. Freeman School of Business

Marshall W. Van Alstyne


Boston University - Department of Management Information Systems; Massachusetts Institute of Technology (MIT) - Sloan School

July 27, 2010

Forthcoming 2011, Strategic Management Journal
Harvard Business School Entrepreneurial Management Working Paper No. 07-104

Abstract:     
Due to network effects and switching costs in platform markets, entrants generally must offer revolutionary functionality. We explore a second entry path that does not rely upon Schumpeterian innovation: platform envelopment. Through envelopment, a provider in one platform market can enter another platform market, combining its own functionality with the target’s in a multi-platform bundle that leverages shared user relationships. We build upon the traditional view of bundling for economies of scope and price discrimination and extend this view to include the strategic management of a firm's user network. Envelopers capture share by foreclosing an incumbent’s access to users; in doing so, they harness the network effects that previously had protected the incumbent. We present a typology of envelopment attacks based on whether platform pairs are complements, weak substitutes or functionally unrelated, and we analyze conditions under which these attack types are likely to succeed.

Number of Pages in PDF File: 23

Keywords: Market entry, platforms, network effects, bundling, foreclosure

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Date posted: June 28, 2007 ; Last revised: August 27, 2013

Suggested Citation

Eisenmann, Thomas R. and Parker, Geoffrey and Van Alstyne, Marshall W., Platform Envelopment (July 27, 2010). Forthcoming 2011, Strategic Management Journal; Harvard Business School Entrepreneurial Management Working Paper No. 07-104. Available at SSRN: http://ssrn.com/abstract=1496336 or http://dx.doi.org/10.2139/ssrn.1496336

Contact Information

Thomas R. Eisenmann (Contact Author)
Harvard University - Entrepreneurial Management Unit ( email )
Cambridge, MA 02163
United States
Geoffrey Parker
Tulane University - A.B. Freeman School of Business ( email )
7 McAlister Drive
New Orleans, LA 70118
United States
504-865-5000 (Phone)
504-865-6751 (Fax)
HOME PAGE: http://ggparker.net
Marshall W. Van Alstyne
Boston University - Department of Management Information Systems ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
617-358-3571 (Phone)
HOME PAGE: http://smgapps.bu.edu/mgmt_new/profiles/VanAlstyneMarshall.html
Massachusetts Institute of Technology (MIT) - Sloan School ( email )
Center for Digital Business
5 Cambridge Center - NE25, 7th Floor
Cambridge, MA 02142
United States
617-253-0768 (Phone)
HOME PAGE: http://web.mit.edu/marshall/www/home.html
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