Giving the Old Platform a New Lease on Life: The Unintended Effect of Backward Compatibility on Platform Adoption Decisions

Il-Horn Hann (), Byungwan Koh () and Marius F. Niculescu ()
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Byungwan Koh: Haskayne School of Business, University of Calgary
Marius F. Niculescu: Scheller College of Business, Georgia Institute of Technology

No 12-17, Working Papers from NET Institute

Abstract: We investigate the impact of backward compatibility on the adoption of multi-generation platforms. Our context is a mobile platform where platform users download services from third party providers. For each hardware platform generations, the services depend greatly on the embedded functionality. Newer handsets are backward compatible with respect to services. We develop a model to identify several drivers of adoption of subsequent generations of handsets, which include (i) the migration from older to newer generations of handsets, (ii) the relationship between services and handset users, and (iii) backward compatibility effect of handsets with respect to older generation services. Our main finding is that the backward compatibility effect has a perhaps unintended consequence; the continued use of older generation services on newer generation handsets provides a fresh lease on life for older generation handsets. This 'shot in the arm' for older generation handsets effect is due to the users who remain on or adopt an older generation platform instead of adopting a newer generation platform.

Keywords: Multi-generation diffusion; technology platform ecosystems; lease on life; network economics; backward compatibility (search for similar items in EconPapers)
JEL-codes: L86 L96 O33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-09
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