Threat of Platform-Owner Entry and Complementor Responses: Evidence from the Mobile App Market
50 Pages Posted: 11 Oct 2016 Last revised: 17 Apr 2019
Date Written: June 1, 2018
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 the threat of Google’s 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. 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 wasteful development efforts. 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: Suggested Citation