Aalto U., Department of Industrial Engineering and Management, Finland
Classic strategy research on multimarket competition explains why firms refrain from fierce competition when meeting familiar competitors in multiple markets. Firms forbear because attacks and gains in one market may instigate counterattacks and greater losses in all other markets. This paper provides the first explicit attempt to bridge classic multimarket competition with contemporary platform competition. We propose that platform firms’ strangleholds and footholds in each other’s markets give rise to mutual spheres of influence which deter rivalry in their important strongholds. This complements extant platform theory by presenting an alternative explanation for leading platforms’ stable and profitable businesses that is not based on demand economies of scale (network effects) and scope (platform envelopment). We conclude with implications for platform strategy research.
