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

48 Pages Posted: 11 Oct 2016 Last revised: 23 Jun 2018

Wen Wen

University of Texas at Austin - McCombs School of Business

Feng Zhu

Harvard University - Harvard Business School

Date Written: June 1, 2018

Abstract

This paper studies the impact of platform-owner entry threat on complementors in platform-based markets. We examine how app developers on the Android mobile platform adjust innovation efforts (rate and direction) and value-capture strategies in response to Google’s entry threat into their markets. We find that, after Google’s entry threat increases, affected developers reduce innovation and raise the prices for the affected apps. However, their incentives to innovate are not completely suppressed; rather, they shift innovation to unaffected and new apps. Given that many apps already offer similar features, Google’s entry threat may thus reduce such social inefficiency. We discuss the implications of these results for platform owners, complementors, and policy makers.

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 (June 1, 2018). 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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