Competing with Complementors: An Empirical Look at Amazon.com

43 Pages Posted: 4 Dec 2014 Last revised: 6 Jun 2018

See all articles by Feng Zhu

Feng Zhu

Harvard University - Harvard Business School

Qihong Liu

University of Oklahoma - Department of Economics

Date Written: June 6, 2018

Abstract

Research summary: Platform owners sometimes enter complementors’ product spaces and compete against them. Using data from Amazon.com to study Amazon’s entry pattern into third-party sellers’ product spaces, we find that Amazon is more likely to target successful product spaces. We also find that Amazon is less likely to enter product spaces that require greater seller efforts to grow, suggesting that complementors’ platform-specific investments influence platform owners’ entry decisions. While Amazon’s entry discourages affected third-party sellers from subsequently pursuing growth on the platform, it increases product demand and reduces shipping costs for consumers. We consider the implications of these findings for complementors in platform-based markets.

Managerial summary: Platform owners can exert considerable influence over their complementors’ welfare. Many complementors with successful products are pushed out of markets because platform owners enter their product spaces and compete directly with them. To mitigate such risks, complementors could build their businesses by aggregating non-blockbuster products or focusing on products requiring significant platform-specific investments to grow. They should also develop capabilities in new product discovery so that they could continually bring innovative products to their platforms.

Suggested Citation

Zhu, Feng and Liu, Qihong, Competing with Complementors: An Empirical Look at Amazon.com (June 6, 2018). Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 15-044. Available at SSRN: https://ssrn.com/abstract=2533616 or http://dx.doi.org/10.2139/ssrn.2533616

Feng Zhu (Contact Author)

Harvard University - Harvard Business School ( email )

Soldiers Field Road
Morgan 431
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=14938

Qihong Liu

University of Oklahoma - Department of Economics ( email )

Norman, OK 73019-2103
United States
405-325-5846 (Phone)

HOME PAGE: http://qliu.oucreate.com

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