When Do ISVs Join a Platform Ecosystem? Evidence from the Enterprise Software Industry

In the enterprise software industry leading firms usually adopt an open platform strategy and nurture their innovation ecosystem to achieve the shared success of the community. In this study we examine the antecedents of small independent software vendors’ (ISVs’) decision to join a platform ecosystem. Using data of 1208 ISVs’ history of partnering activities with a major enterprise software marker from 1996 to 2004, we find that appropriability strategies based on intellectual property rights and the possession of downstream complementary capabilities by ISVs are positively related to the partnership formation, and ISVs use the two mechanisms as substitutes to prevent expropriation by the platform owner. In addition, we show that greater level of competition in the downstream market between ISVs and the platform owner negatively affects the likelihood of partnering. The results highlight the role of innovation appropriation, downstream complementary capabilities and collaborative competition in the formation of enterprise software platform ecosystems.