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
Date Written: October 1, 2017
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: Suggested Citation