The Dynamics of Entry for Digital Platforms in Two-Sided Markets: A Multi-Case Study

Abstract

Motivating buyers and sellers to join an empty platform is thought to be a key challenge for firms attempting to launch digital platforms in two-sided markets. According to predictions from extant literature, ’no one joins until everyone joins’. The phenomenon is often referred to as the “chicken-and-egg problem”. This study investigates the phenomenon in an exploratory multi-case study of ten startup technology firms operating digital platforms in two-sided markets. The study finds that the firms entered their markets using a variety of strategies distinguishable by strategic, relational and temporal factors. A conceptual framework is proposed which distinguishes the firms’ strategies along these dimensions. In addition, a cross-case discussion of the dynamics of the firms’ strategies is provided. Deductively, the findings contribute to establishing an empirical grounding for predictions from extant literature. Inductively, the findings contribute preliminary managerial implications as well as propositions for further research on entry strategies for digital platforms in two-sided markets.