To Hunt or to Scavenge: Competitive Advantage and Competitive Strategy in Platform Industries

Firms choose their competitive strategies to achieve competitive advantage. With the help of a dynamic model we demonstrate that in platform industries, any market structure can be mapped into different types of competitive (dis-) advantage. Numerically simulating the model allows us to find the optimal competitive strategy for each competitive position of a firm within a given market structure. Combining the two concepts, we derive guidelines for determining a firm's optimal competitive strategy conditional on the firm's competitive position within its platform and the position of its platform within the industry. We apply those guidelines to discuss the micro-computer market. We would like to thank Shane Greenstein, as well as seminar participants at Harvard University, Northwestern University, University of Redlands, the ZEW conference in Mannheim, and the 3 rd Israel Strategy Conference for very helpful comments. Angela Malakhov, Ami Navon and Veronica Tong provided excellent research assistance. All remaining errors are ours. * A previous version of this paper, entitled "To Hunt or to Scavenge: Optimal Investment Strategies in the Presence of Indirect Network Effects" received the best paper award of the 3 rd Israel Strategy Conference. ** Arison School of Management, Hertzliya, Israel, [email protected] *** School of Business, Redlands, Ca-92373-0999, Tel.: (909) 748-8779, [email protected] To Hunt or to Scavenge page 2