2016/03/24 by Tobias Kretschmer, Jörg Claussen · 76 citations
Business, Management and Accounting · Decision Sciences · Economics, Econometrics and Finance · Engineering · #Backward compatibility #Business #Compatibility (geochemistry) #Computer science #Digital Platforms and Economics #Engineering #Firm Innovation and Growth #Industrial organization #Innovation Diffusion and Forecasting #Marketing #Multimedia #New product development #Operating system #Software #Video game
paper · pdf · doi:10.1287/stsc.2015.0009
published in Strategy Science 1(2), 90-104 (Institute for Operations Research and the Management Sciences)
openalex publication_date 2016/03/24 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
The introduction of a new product generation forces incumbents in platform markets to rebuild their installed base of complementary products. Using three different data sets on the U.S. market for video game consoles, we show that incumbents can, to some extent, substitute for rebuilding their new installed base by making their new products backward compatible, which lets them draw on the installed base of software for the parent generation. However, while this positive direct effect of backward compatibility dominates in our setting, we also observe a (weaker) negative indirect effect working through the reduced supply of new software. We find that both effects are moderated by the age of the new technological generation and by the technological leap between generations: backward compatibility becomes less important with increasing console age and larger technological improvement between generations.