Abstract:

As emerging technologies such as artificial intelligence， blockchain and augmented reality grow， an increasing number of software platforms are investing in new technologies to foster continuous innovation. In practice， some lead software platforms are forward-looking in the development of emerging technologies. Due to the difficulty and uncertainty of developing emerging technologies， investments by various software platforms in the same technology often occur sequentially in the market. When one software platform has already invested in a new technology， the subsequent investment strategies pursued by other platforms may vary.Therefore， the software platform’s follow-up strategies on technology investment are examined by considering the functional level of the technologies invested by competing platforms and cross-side network effects. A game-theoretical model of platform investment strategy in a duopoly setting is developed， to study how the platform makes a follow-up investment choice and the optimal pricing decision when one of the competing platforms has invested in a new technology. Specifically， the optimal follow-up technology investment strategy of the software platform is first analyzed， followed by an exploration of the impact of cross-side network effects on the platforms’ follow-up investment decisions. Finally， the optimal decision regarding the technological functional level is examined when the platform engages in follow-up technology investment.The main findings are as follows， the platform should follow up the technology investment when the marginal integration cost of developers is low， the marginal development cost of the platform is high， and the functional level of the technology invested by the platform is low. As the user-to-developer network effect increases， the platform's willingness to follow up the technology investment increases. The impact of the developer-to-user network effect on the platform's willingness to follow up the technology investment is affected by the functional level of its investment technology. It provides insights into the investment strategy decisions of software platforms regarding emerging technologies， while also addressing the gap in existing literature concerning the research on follow-up investment strategies of competitive software platforms.

Key words: software platform, third-party developer, technology investment, functional level of the technology, integration capability