Platform Competition in Unstable Contexts

This paper examines the evolution of competition and network externality advantages in platform markets under macroeconomic distress. We propose that economic shocks exogenously induce short-term and long-term industry discontinuities that shift the relative value of isolating mechanisms, thereby switching the timing of entry competitive advantages vis-a-vis those found in stable contexts. As such, economic shocks prevent early-entrants’ advantages, while alternatively giving laggards the opportunity to catch up and even overtake first-mover rivals. Our study informs entry-order advantage theory and management practice in economically turbulent contexts and is supported by an empirical study on the industry of operating systems for mobile phones.