Digital Platforms: When Is Participation Valuable?

Smart owners of information technology (IT) platforms develop ecosystems and encourage third-party producers to develop complements—products that run on the platform. Independent software vendors develop complements for the platforms of major vendors (for example, SAP, Apple). In addition, such platform companies sometimes create Internet-based knowledge-sharing communities in which users exchange ideas. The benefits and costs of such participation are tied to what economists call "knowledge spillovers."

This column reports on four studies of complements to SAP's flagship enterprise resource planning software.^{1, 2, 3, 4} Users can participate in the SAP Developer Network (SDN), a knowledge-sharing community that encourages voluntary knowledge exchange regarding the implementation, use, and customization of SAP software. A study of 275 firms participating in SDN between 2004 and 2008 showed firms using the platform's online question-and-answer forum had significantly higher productivity. Knowledge spillovers were at work. Valuable knowledge gained from investments in SAP by user firms was transferred to others through the online forum, helping the diffusion of best practices related to the platform. Preliminary estimates suggest a 1% increase in such inward knowledge spillovers will increase production output by many thousands of dollars.