Externalities and complementarities in platforms and ecosystems: From structural solutions to endogenous failures

by Michael G. Jacobides, Carmelo Cennamo, and Annabelle Gawer

Abstract

Platforms and ecosystems provide structures for constellations of economic actors to engage and interact as they seek to create and capture value. We consider how the constructs of platforms and ecosystems relate and explore why they have become more ubiquitous by focusing on the nature of their value-add. We propose that they emerge as a response to distinct market failures, which we identify, and we explain which specific externalities they help overcome. We also identify post-hoc endogenous functional and distributional failures that platforms and ecosystems, in turn, generate. We discuss implications for theory and practice.

Highlights

• Platforms and ecosystems emerge as new organizational forms that provide distinct ways to cope with externalities and as such address market (or organizational) failures.

• While the two terms have emerge from different traditions, and are clearly connected, we can usefully distinguish between the two, and showcase their connections.

• We can identify distinct coordination and value creation mechanisms in platforms and ecosystems, driven by complementarities and externalities.

• Platforms and ecosystems, in turn, engender their own types of functional, distributional and social failures.

• Ecosystems’ growing scope illustrates the distinction between multi-product and multi-actor groups, and suggests that the topology of ecosystems will help guide strategy and policy.

Link to full paper: Jacobides, M.G., Cennamo, C., & Gawer, A. (2024). Externalities and complementarities in platforms and ecosystems: From structural solutions to endogenous failures. Research Policy, 53 (1), 104906. doi: https://doi.org/10.1016/j.respol.2023.104906