Openness as Platform Strategy – Evidence from a Quasi-Experiment in Crowdfunding

A platform’s decision whether to open up or control access to its marketplace is at the core of its business strategy. It needs to weigh the benefits of market thickness against the costs of potential congestion and quality concerns. Pre-screening platform participants and excluding undesired suppliers may give platforms the possibility toprevent market failure and ensure competitive advantage in the long run. The level of openness and governance are hence key strategic parameters for platforms. In this project, we analyze the implications of an open platform strategy and the conditions under which it is likely to pay off. We empirically test our hypotheses in the reward-based crowdfunding market. We analyze the strategic decision of Kickstarter, the leading crowdfunding platform, to switch from access control to de facto openness. We assess the effects of the policy change on market thickness, market matches, project quality, and ultimately consumer satisfaction.