Abstract
In markets with network externalities, the platform that achieves a critical mass of users will gain market momentum and further attract users. Despite this predicted self-reinforcing feedback propelled by “excess inertia”, we observe new platforms dethroning established ones in several contexts. Why are some platforms able to sustain momentum over time while others lose it in favor of dethroners? We address this question conceptually by revisiting the concept of momentum into the inertial and dynamic components and empirically by estimating the effects of both components on platform adoption and market performance. Drawing from Physics, we conceptualize the inertial component of momentum (i.e., mass) as the stock of platform complements, and the dynamic component (i.e., velocity) as the period-by-period change in such stock—complement novelty. We show that the dynamic component of momentum explains to a larger extent the sustained momentum and performance of a platform and has a predictability power for estimating the point at which the overall market tips for platforms of the next technology generation. This has relevant implications for technology and platform adoption and competitive dynamics and helps explain why latecomers may dethrone incumbents despite network disadvantages.