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Threat of Platform-Owner Entry and Complementor Responses: Evidence from the Mobile App Market

42 Pages Posted: 11 Oct 2016 Last revised: 28 Oct 2017

Wen Wen

University of Texas at Austin - McCombs School of Business

Feng Zhu

Harvard University - Harvard Business School

Date Written: October 1, 2017

Abstract

We examine how app developers on the Android mobile platform adjust their innovation efforts (rate and direction) and value capture strategies in response to Google’s entry threat and actual entry into their markets. We find that, after Google’s entry threat increases, affected developers reduce innovation and raise the prices for the affected apps. Once Google enters, the developers reduce innovation and increase prices further. However, app developer’s incentives to innovate are not completely suppressed; rather, they shift innovation to unaffected and new apps. Given many apps already offering similar features, Google’s entry may reduce such social inefficiency.

Keywords: Platform-owner Entry, Entry Threat, Innovation, Complementors, Mobile App Industry

JEL Classification: L11, L86, O32

Suggested Citation

Wen, Wen and Zhu, Feng, Threat of Platform-Owner Entry and Complementor Responses: Evidence from the Mobile App Market (October 1, 2017). NET Institute Working Paper No. 16-10. Available at SSRN: https://ssrn.com/abstract=2848533 or http://dx.doi.org/10.2139/ssrn.2848533

Wen Wen (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

2110 Speedway Stop B6500
Austin, TX 78712
United States

Feng Zhu

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

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