Abstract

http://ssrn.com/abstract=1692252
 
 

References (53)



 


 



Commercialization of Platform Technologies: Launch Timing and Versioning Strategy


Hemant K. Bhargava


University of California, Davis

Daewon Sun


University of Notre Dame

Byung Cho Kim


Virginia Polytechnic Institute & State University - Pamplin College of Business

January 11, 2012

Production and Operations Management, 2012

Abstract:     
Many emerging entrepreneurial applications and services connect two or more groups of users over Internet-based information technologies. Commercial success of such platform technology products requires adoption of astute business practices related to product line design, price discrimination, and launch timing. We examine these issues for a platform firm that serves two markets, labeled as user and developer markets, with the latter emerging after the user market is proven. While the size of each market positively impacts participation in the other, our model allows for uncertainty regarding developer participation. We demonstrate that product versioning is an especially attractive strategy for platform firms, i.e., the tradeoff between market size and margins is tilted in the direction of more versions. However, when expanding the product line carries substantial fixed costs (e.g., marketing cost, cost of additional plant, managing multiple sets of inventory, increased distribution cost) then the uncertainty in developer participation adversely impacts the firm’s ability to offer multiple versions. We show that for established firms with lower uncertainty about developer participation, the choice is essentially between an expanded or minimal product line. Startups and firms that are entering a new product category are more likely to benefit from a “wait and see” deferred expansion strategy. Still, we demonstrate that uncertainty in developer participation can make early expansion desirable because it expands the installed base and, with the consequent increase in developer participation levels, increases the long-term incremental gain from product line expansion.

Number of Pages in PDF File: 47

Keywords: Technology Commercialization, Product Launch Strategy, Platform Technology, Versioning, Uncertainty

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Date posted: October 17, 2010 ; Last revised: September 7, 2014

Suggested Citation

Bhargava, Hemant K. and Sun, Daewon and Kim, Byung Cho, Commercialization of Platform Technologies: Launch Timing and Versioning Strategy (January 11, 2012). Production and Operations Management, 2012. Available at SSRN: http://ssrn.com/abstract=1692252 or http://dx.doi.org/10.2139/ssrn.1692252

Contact Information

Hemant K. Bhargava (Contact Author)
University of California, Davis ( email )
One Shields Avenue
Davis, CA 95616
United States
Daewon Sun
University of Notre Dame ( email )
Notre Dame, IN 46556-5646
United States
Byung Cho Kim
Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )
1016 Pamplin Hall
Blacksburg, VA 24061
United States
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