Cocreation of Value in a Platform Ecosystem: The Case of Enterprise Software

It has been argued that platform technology owners co-create business value with other firms in their innovation ecosystems to encourage complementary invention and exploit indirect network effects. In this study we examine whether participation in an ecosystem partnership improves the business performance for small independent software vendors (ISVs) in the enterprise software industry and how appropriability mechanisms influence the benefits of partnership. By analyzing the partnering activities and performance indicators of a sample of 1210 small ISVs over the period of 1996-2004, we find that joining a major platform owner’s innovation ecosystem is associated with an increase in sales and a greater likelihood of issuing an IPO. In addition, we show that these impacts are stronger when ISVs have greater intellectual property rights or stronger downstream capabilities. This research highlights the value of interoperability between software products, and stresses that value co-creation and appropriation are not mutually exclusive strategies in inter-firm collaboration.