Openness as Platform Strategy - Evidence from a Quasi-Experiment in Crowdfunding

36 Pages Posted: 7 Mar 2018

See all articles by Fabian Gaessler

Fabian Gaessler

Max Planck Institute for Innovation and Competition

Zhaoxin Pu

Max Planck Institute for Innovation and Competition

Date Written: March 1, 2018

Abstract

A platform's decision to open up its marketplace is at the core of its business strategy. It needs to balance between the benefits of market thickness and the costs of potential congestion and quality concerns. We discuss how openness can increase platform value and test our hypotheses by analyzing the strategic decision of a leading crowdfunding platform to switch from access control to de facto openness. The decision increased market thickness on the previously access-controlled supply side of crowdfunding projects. The platform hereby gained market share from its main competitor. Market matches on the platform increased in absolute but not in relative terms. Moreover, quality on the supply side declined immediately, lowering platform value for demand-side users.

Keywords: Platforms, openness, platform governance, crowdfunding

JEL Classification: G24, L13, L15

Suggested Citation

Gaessler, Fabian and Pu, Zhaoxin, Openness as Platform Strategy - Evidence from a Quasi-Experiment in Crowdfunding (March 1, 2018). Max Planck Institute for Innovation & Competition Research Paper No. 18-05 . Available at SSRN: https://ssrn.com/abstract=3133042 or http://dx.doi.org/10.2139/ssrn.3133042

Fabian Gaessler (Contact Author)

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, 80539
Germany

Zhaoxin Pu

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

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