Under Review

Complementor Responses to Platform Entry: Heterogeneity and Cross-Platform Innovation

Abstract:

Prior research has documented adverse effects of platform owner entry into complementor spaces. This study examines how complementor heterogeneity affects the rate and direction of innovation across diverse competitive landscapes. We argue that firms with multihoming experience prior to platform entry shift their innovative effort to a competing platform, while singlehoming complementors focus their innovation on the focal platform. Following Apple’s “Files” app entry, we find that singlehoming firms increase ex-post innovation on the focal platform (Apple App Store), albeit to varying degrees across different product markets, whereas multihoming firms shift their innovative effort to a competing platform (Google Play Store). This paper contributes to platform entry literature by highlighting complementor heterogeneity as a driver of the rate and direction of innovation.

Keywords:

Platform entry; complementor innovation; multihoming; resource reallocation

Myopic Expansions on Platforms: Evidence From Mobile Application Markets

Abstract:

The literature on market design and multisided platforms focuses primarily on the positive impact of resolving market frictions on the aggregate market size and efficiency. In this paper, we argue that extensive resolution of market frictions associated with market entry on multisided platforms can nudge platform participants to overlook the heterogeneous nature of different markets and, consequently, to engage in large-scale, myopic market expansions. These expansions, in turn, can lead to lower customer satisfaction and performance. We test our arguments in the context of Apple’s App Store. We find that app developers’ large-scale market expansions increase their client base in the short run but negatively affect their ratings, downloads, financial performance, and innovation rate in the longer run.

Keywords:

platform strategy; multisided platforms, market entry; market frictions; market design, mobile apps; complementor performance