Entrepreneurship in digital platforms: A network‐centric view

• DOI: http://doi.org/10.1002/sej.1272
• Author: N. Venkatraman,Arati Srinivasan
• Published date: 01 March 2018
• Date: 01 March 2018

RESEARCH ARTICLE

Entrepreneurship in digital platforms: A network-

centric view

Arati Srinivasan

1

| N. Venkatraman

2

1

School of Business, Providence College,

Providence, Rhode Island

2

School of Management, Boston University,

Boston, Massachusetts

Correspondence

Arati Srinivasan, School of Business,

Providence College, 1 Cunningham Square,

Providence, RI 02918.

Email: asriniva@providence.edu

Research Summary: Research on entrepreneurship has focused

primarily on the individual characteristics of founders in driving

the success of new ventures offering stand-alone products and/or

services. In recent years, we have seen an increase in entrepre-

neurship in digital platforms—where success requires positioning

products and services within dynamic digital networks that depict

complex connections among platforms, complementary modules,

and consumers. This article introduces key elements of a theory

for settings where entrepreneurship success is intricately con-

nected to the moves of other entrepreneurs and coordinated

within and across platforms. We introduce a network-centric view

to understand how entrepreneurs occupying the role of third-party

developers support digital platforms by their choices to link to

them. Furthermore, we develop propositions reflecting a dynamic

perspective representing two key stages of competition in digital

platforms, initial launch, and scale-up. We hope this work guides

further theorizing and empirical research in digital platforms and

entrepreneurship in general.

Managerial Summary: Over the last decade, we have seen a rise in

digital entrepreneurs who support platforms such as Apple iOS,

Google’s Android, Facebook, Twitter, and others. The success of

platforms requires support from applications, and entrepreneurs in

such settings play a critical role in making some platforms succeed

relative to others. Our study provides insight into how digital

entrepreneurs can orchestrate strategic moves that allow them to

navigate the complex landscape of linking and adapting to differ-

ent platforms and how these linkage choices can lead to entrepre-

neurial success.

KEYWORDS

complementors, digital platforms, entrepreneurship, modularity,

networks, technology

Received: 13 January 2014 Revised: 14 March 2017 Accepted: 16March 2017 Published on: 14 October 2017

DOI: 10.1002/sej.1272

Copyright © 2017 Strategic Management Society

54 wileyonlinelibrary.com/journal/sej Strategic Entrepreneurship Journal. 2018;12:54–71.

1|INTRODUCTION

Considerable academic interest has focused on the entrepreneurial process—specifically the discovery and exploita-

tion of entrepreneurial opportunities, the role of key individuals involved in driving the entrepreneurial process, and

ultimately, the success of new ventures (Gartner, 1988; Low & MacMillan, 1988; Shane & Venkataraman, 2000).

Studies have focused on the role of the behavioral and cognitive characteristics of the founders and/or founding

teams in identifying entrepreneurial opportunities and creating new ventures (for instance, Baron, 2007; Brinck-

mann & Hoegl, 2011; Cassar & Friedman, 2009; Dyer, Gregersen, & Christensen, 2008; Markman, Balkin, & Baron,

2002; R. Mitchell et al., 2007; Sleptsov & Anand, 2008). Other studies have gone further to understand how foun-

der attributes ultimately lead to the success or failure of their key ventures. For instance, performance of new ven-

tures has been linked to prior experience and ability to acquire cognitive resources (Baron & Henry, 2010; Boeker &

Fleming, 2010); individual knowledge and skills (Hitt, Ireland, Sirmon, & Trahms, 2011); improvisational behavior of

entrepreneurs (Hmieleski, Corbett, & Baron, 2013); entrepreneurial orientation (Wales, Patel, Parida, & Kreiser,

2013); networking ability of entrepreneurs (Semrau & Sigmund, 2012); and the self-efficacy of lead founders

(Hmieleski & Baron, 2008). This line of work assumed that an individual entrepreneurial company succeeds based

solely on its firm-specific capabilities.

More recently, there has been a growing call to adopt the social network perspective as an analytical lens for

understanding strategic actions and performance of entrepreneurs (e.g., Stuart & Sorenson, 2007), and some have

focused on the role of the entrepreneurial actor's network in driving opportunity recognition (for example, Elfring &

Hulsink, 2003; Stuart & Ding, 2006) and resource mobilization (for instance, Higgins & Gulati, 2003; Robinson &

Stuart, 2007; Shalley & Perry-Smith, 2008).

Such a network perspective,however, has been limited to social linkages and does not recognizedigital platforms

as settings that call for understanding entrepreneurship in the presence of complementary products (Katz & Shapiro,

1994; Schilling, 2003) with key resources obtained from ecosystem partners. Windows in personal computers and

iPhone and Android in smartphones represent such digital platforms. Entrepreneurs, who developed complementary

software, have played key roles in the successful dominance of Microsoft’s Windows operating system (Bresnahan &

Greenstein, 1999) in personal computers (PCs) during the 1990s and more recently for Apple’s and Google’s success

with the iPhone and Android,respectively. Such entrepreneurship requirescontinually adapting choices to current and

new platforms under dynamic shifts of technical and business architectures (Baldwin & Clark, 1997) without formal

mechanisms of long-termcontracts or equity investments (Gawer& Cusumano, 2002; Venkatraman & Lee, 2004).

Our goal in this article is to adopt the network perspective to theorize about entrepreneurial success in digital

platforms. We draw on extant research on networks and platform-based competition to explain how a digital entre-

preneur’s choice of linkage in two types of networks—resource (Barabasi, 2002; Powell, White, Koput, & Owen-

Smith, 2005; Venkatraman & Lee, 2004) and module networks (Arthur, 1989; Eisenmann, Parker, & Van Alstyne,

2006; Katz & Shapiro, 1994; Shapiro & Varian, 1998)—determines their likelihood of success. Resource networks

describe the networks of relationships that digital entrepreneurs use to gain financial and human capital. Module

networks refer to the networks of relationships that digital entrepreneurs form with the platform firms they choose

to support. Further, we expand our understanding of entrepreneurship in digital platforms by adopting a dynamic

perspective that recognizes that the linkage choices in each of these types of networks vary at the different stages

of start-up and scale-up.

The rest of our article is organized as follows: The next section describes the role of entrepreneurship in digital

platforms. Specifically, we describe the digital platform setting and draw on current research on entrepreneurship

and platform-based competition to describe the types of networks of which digital entrepreneurs are part. We then

offer a set of propositions on how entrepreneurial success in these settings can be obtained through the linkage

decisions of digital entrepreneurs in their resource and module networks. We conclude by discussing the implica-

tions of our study for research on platforms in particular and entrepreneurship in general.

SRINIVASAN AND VENKATRAMAN 55