Under Review

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.

Abstract:

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.

Keywords:

Platform entry; complementor innovation; resource redeployment; adjustment costs; mobile-app industry