How Do Complementors Respond to the Threat of Platform Owner Entry? Evidence from the Mobile App Market

36 Pages Posted: 11 Oct 2016 Last revised: 9 Dec 2016

Wen Wen

University of Texas at Austin - McCombs School of Business

Feng Zhu

Harvard University - Harvard Business School

Date Written: September 30, 2016

Abstract

How do complementors respond to the threat of platform owner entry, and how do such responses differ from the responses to actual entry? We examine how app developers on the mobile platform Android adjust their rate and direction of innovation efforts and prices in response to Google’s entry threat and actual entry into to the app markets. We find that developers affected by Google’s entry reduce innovation efforts on their affected apps and increase these apps’ prices after entry threats increase. They reduce innovation efforts and increase prices further on affected apps after Google’s actual entry. Affected developers, however, do not withdraw from the platform completely — once the threats increase, they shift innovation efforts from affected apps to updating other unaffected apps and to developing new apps.

Keywords: Platform Owner Entry, Entry Threat, Innovation, Complementors, Mobile App Industry

JEL Classification: L11, L86, O32

Suggested Citation

Wen, Wen and Zhu, Feng, How Do Complementors Respond to the Threat of Platform Owner Entry? Evidence from the Mobile App Market (September 30, 2016). 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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