The Adoption of Multi-Generational Platforms in the Presence of Intergenerational Services

Abstract

We investigate the impact of intergenerational services on the adoption of multi-generational platforms. We consider mobile Internet platform generations for which users download complementary services from third party providers. These services are often intergenerational: newer platforms are backward compatible with respect to services released under older platform generations. In this paper, we develop a model to identify the main drivers of adoption of subsequent generations of mobile Internet platforms, including (i) the migration from older to newer platform generations, (ii) the indirect network effect between platform users and services, and (iii) the effect of intergenerational services on platform adoption. Using data on mobile Internet platform adoption and services consumption from a major wireless carrier in an Asian country for the time period of 2001-2007, we estimate the three effects noted above. We show that both the migration from older to newer platform generations and the indirect network effect are significant. The surprising finding is that intergenerational services that connect subsequent generations of platforms essentially engender backward compatibility with two opposing effects. While an intergenerational service may accelerate the migration to the subsequent platform generations, it may also, perhaps unintentionally, provide a fresh lease on life for older generation platforms due to the continued use of older generation services on newer platform generations. This 'shot in the arm' effect for older generation platforms is due to the users who adopt an older generation platform instead of adopting a newer one.

Keywords: Platforms, multi-generation diffusion, backward compatibility of services, lease on life, network economics

JEL Classification: L86, L96, O33