Software Components and Product Variety in a Digital Platform Ecosystem: A Dynamic Network Analysis of WordPress
39 Pages Posted: 23 Dec 2020
Date Written: August 20, 2020
Outside developers invert the firm in a platform ecosystem. A platform ecosystem creates value for its users through the work of outside developers who develop a variety of products within the ecosystem. These outside developers use software components, e.g., Application Programming Interfaces (APIs) provided by the platform owner (internal APIs) as well as digital service providers (external APIs) to generate a variety of products for the ecosystem. However, the impact of external APIs on product variety within an ecosystem has not been fully explored. To fill the gap, we use a network method to model how different types and use frequencies of APIs affect an increase in functional categories of products developed by outside developers, which in turn collectively represent product variety. Drawing on a combinatorial design perspective, we specify that product variety is increased through the re-combination of different API types provided by the platform owner and digital service providers. Based on the core/periphery model of programming resources, we find that according to their use frequency and relative importance there are three layers of API, i.e., complete core, regular core, and periphery, in a digital platform ecosystem. We conduct an empirical study using the longitudinal data of all available plug-in source codes from WordPress.org, the world's largest content management platform ecosystem. By analyzing WordPress' plug-ins over the ten-year period since its inception, we discovered that the re-combination of APIs from these three distinct layers display different effects on product variety. We further find the new insight that the combinatorial design of external APIs affects the increase of product variety, but such effect can be weakened in categories mainly consisting of a dominant design.
Keywords: Digital Innovation, Platform ecosystem, Product Variety, Combinatorial Design, API, Plug-in, Network method, Hierarchical clustering, Block modeling
JEL Classification: M15, L1, L17
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