Platform Entry and Innovation: The Role of Adjustment Costs in Shaping Complementor Strategy
- with Prof. Aldona Kapacinskaite (Bocconi)
- R&R at Strategic Management Journal (2023)
- Presented at SMS, AOM, DRUID, and BU Platform Summit.
Prior literature has documented conflicting findings regarding complementors’ response to platform owner entry, showing both higher and lower complementor innovation in affected domains. We reconcile these findings by introducing a resource redeployment lens. We argue that following platform entry, complementors with high adjustment costs increase innovation on the focal platform, whereas low-adjustment-cost complementors shift innovation to a competing platform. We empirically test our hypotheses by analyzing Apple’s entry in the App Store with the “Files” application in 2017. Consistent with our arguments, we find that high-adjustment-cost developers increase ex-post innovation on the focal platform (Apple App Store), whereas low-adjustment-cost developers redeploy resources to a competing platform (Google Play Store). We contribute to platform and resource redeployment literatures, highlighting heterogeneity in complementor response to platform entry.
Platform entry; complementor innovation; resource redeployment; adjustment costs; mobile-app industry