Platform Ecosystems: How Developers Invert the Firm

For a period starting in 2015, Apple, Google, and Microsoft became the most valuable companies in the world. Each was marked by an external developer ecosystem. Anecdotally, at least, developers matter. Using a formal model of code spillovers, we show how a rising number of developers can invert the firm. That is, firms will choose to innovate using open external contracts in preference to closed vertical integration. The locus of value creation...