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Competing with Complementors: An Empirical Look at Amazon.com

37 Pages Posted: 4 Dec 2014 Last revised: 4 Mar 2016

Feng Zhu

Harvard University - Harvard Business School

Qihong Liu

University of Oklahoma - Department of Economics

Date Written: February 4, 2016

Abstract

Platform owners sometimes enter complementors’ product spaces to compete against them directly. Prior studies have offered two possible explanations for such entries: platform owners may target the most successful complementors so as to appropriate value from their innovations, or they may target poor performing complementors to improve the platforms’ overall quality. Using data from Amazon.com, we analyze the patterns of Amazon’s entry into its third-party sellers’ product spaces. We find evidence consistent with the former explanation: that the likelihood of Amazon’s entry is positively correlated with the popularity and customer ratings of third-party sellers’ products. We also find that Amazon’s entry reduces the shipping costs of affected products and hence increases their demand. Results also show that small third-party sellers affected by Amazon’s entry appear to be discouraged from growing their businesses on the platform subsequently. The results have implications for complementors participating in various platform-based markets.

Suggested Citation

Zhu, Feng and Liu, Qihong, Competing with Complementors: An Empirical Look at Amazon.com (February 4, 2016). 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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