Horizontal Expansion of Multi-Sided Platforms. A Case Study of the Air Charter Industry
Examensarbete för masterexamen
Management and economics of innovation (MPMEI), MSc
During the last 20 years, multi-sided platform (MSP) companies, such as Amazon, Uber and Airbnb, have been able to transform several industries dominated by traditional pipeline businesses. Key factors behind the proliferation of MSPs are network effects, ecosystem advantages and lowered search and transaction costs. Many of these companies have rapidly expanded their platforms in different ways. However, the phenomenon when an MSP expands its platform horizontally, to a new value chain while utilizing existing platform architecture, has lacked attention within MSP research. To shed light on this phenomenon, this thesis set out to answer two research questions. From a company internal perspective: What factors influence an MSP’s decision to expand its platform horizontally into a new but related market segment? and from a company external perspective: What precursors might influence the users in the new market segment to adopt the horizontally expanding MSP? To answer these questions, a case study was conducted on the company Avinode Group, which provides a digital marketplace MSP for the air charter industry that connects air charter brokers with aircraft operators. As Avinode is currently expanding its marketplace platform to also encompass the medical air transportation industry, this case provided an opportunity to study MSP expansion. Through semi-structured interviews with stakeholders in the company and in the medical air transportation industry, the factors underpinning the decision to expand and the precursors for adoption among potential users were explored. The findings indicate that an MSP’s expansion decision is framed by resource constraints that bound which expansion alternative that is possible and feasible. Furthermore, the potential to realize synergies and leverage complementary assets guides the decision. This potential can be high in an horizontally adjacent segment where the MSP’s existing resources can be reused and there might arise network effects across the new and old user groups. Lastly, the expansion decision will be subject to a strategic and value evaluation. Users in the new industry that potentially will adopt are similarly looking to realize benefits from complementary assets and foresee the potential to achieve network effects within its own industry and with the MSP’s existing users, this together with the prospect of a generally improved market overview can be precursors for adoption of an MSP that expands its platform to these new users. The identification of the importance of complementary assets, that stems from the MSP’s whole ecosystem, led the authors to formulate a concept dubbed complementary network assets. This concept encapsulates how assets within the MSP ecosystem that are not directly owned by the platform company can provide positive synergistic and complementary effects for an horizontal MSP expansion.
MSP expansion, horizontal expansion, Complementary network assets.