Platform substitution and cannibalization: The case of portable navigation devices

Abstract

Platform competition may engender a substitution process whereby customers and complementors drift from one platform to another. For example, as the aftermath of a competitive race between a general-purpose platform and a single-purpose rival. A case in point is how sales of personal navigation devices (PND) have allegedly been sapped by GPS-enabled smartphones with comparable turn-by-turn navigation functionalities. Using a structural-break unit-root econometric model, the impact of smartphones on the quarterly volume sales of two leading PND manufacturers can be statistically assessed. Such an econometric analysis reveals a significant shift in the level of the underlying stochastic processes and dates the structural change at the third quarter of 2008, when the iOS and Android ecosystems were launched. © 2012 Springer-Verlag Berlin Heidelberg.