Enhancing Complementor Innovation through Market Information: A Large-scale Empirical Study of an E-Commerce Platform

Abstract

In the platform ecosystem, access to market information is an important driver of complementor innovation, particularly in the creation of new products. Platforms often develop and provide technological tools to enhance market information flows for complementors. In collaboration with a world-leading e-commerce platform and conducting a large-scale empirical analysis of over 40,000 sellers and all of their products, our study is among the first to provide causal evidence on the effect of market information provision on complementor innovation. Specifically, we examine a platform governance policy change regarding a market analytics tool designed to broaden market information access for complementors, and its impact on their new product offerings. Our findings show that the platform's enhanced provision of market information increases the sellers' new product offerings and reduces their product life cycle. Using finegrained product attribute information, we develop novel indices to measure different types of product innovation and find that the increase in new product offerings primarily comes from the products that incorporate new attributes previously absent in the sellers' own portfolio. Thus, the platform governance policy facilitates complementor innovation by enabling sellers to expand the search space of product information and combine it with their product components in a new way to create new products. In addition, we find that sellers utilizing the tool for expanded information access tend to set higher prices and gain higher revenue from their new products compared to their existing ones: an additional benefit from the enhanced innovation. Further investigation into both the supply and demand sides of the product market reveals a tendency of sellers to adopt and integrate new product attributes from other sellers they follow through the tool, resulting from the expanded access to market information. Interestingly, it leads to a degree of alignment of customer bases between sellers and their counterparts as they adapt their product offerings in response to the revealed customer preferences and market needs. Overall, our study demonstrates that market information provision could be an effective strategy to incentivize complementor innovation. It sheds light on the important role of enhanced information access in fostering product innovation among complementors and offers market design implications for platforms and policymakers.

Keywords: Platform Governance, Market Intelligence, Information Accessibility, Product Innovation, Electronic Commerce