Early-stage strategies in two-sided marketplaces

This study explores the early-stage strategies that support the creation and growth of peer-to-peer marketplaces, a particular type of two-sided marketplace. Prior research on two-sided marketplaces has studied well-established firms and has not produced systematic evidence of the origins of two-sided marketplaces when a critical mass of participants has not yet been recruited. Moreover, its focus on formal economic models and price structures provides only a limited understanding of the early stage strategies that create value, recruit initial participants, and induce their interactions. I address limitations of prior research through an inductive multi-case study of ten peer-to-peer marketplaces. Findings suggest host firms create value and recruit initial participants by promoting and monitoring marketplace participants’ conformity with appropriate behaviors. In doing so, they exercise different levels of control (low, average, or high) on two dimensions: a) supply-side heterogeneity and b) cross-side interactions. Considering the interactions of these two dimensions, I propose a typology of nine value-creating activities. Patterns in the sequence in which host firms pursue these activities over time reveal two alternative and “equifinal” paths to promoting participant conformity and ultimately to generating growth. Emergent theory extends literature on resource orchestration to entrepreneurial firms and contributes to research on new forms of organizing.