Positive Demand Spillover of Popular App Adoption: Implications for Platform Owners’ Management of Complements

Mi Hyun Lee (), Sang Pil Han (), Sungho Park () and Wonseok Oh ()
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Mi Hyun Lee: Integrated Marketing Communications, Medill School of Journalism, Media, Integrated Marketing Communications, Northwestern University, Evanston, Illinois 60208
Sang Pil Han: Information Systems, W. P. Carey School of Business, Arizona State University, Tempe, Arizona 85287
Sungho Park: Marketing, Seoul National University Business School, Seoul National University, Seoul 08826, Republic of Korea
Wonseok Oh: Information Systems, College of Business, Korea Advanced Institute of Science and Technology, Seoul 02455, Republic of Korea

Information Systems Research, 2023, vol. 34, issue 3, 961-995

Abstract: As platform owners interact with end users and complementors, their demand-side characteristics and performance affect the overall value creation of ecosystems. This research investigated how the emergence of popular complements on a mobile communication platform impacts the usage of other complementary products by the platform’s end users and how platform owners can benefit from such demand spillovers. We identified two different forms of demand spillovers (i.e., backward and forward) and conceptualized how each subsequently affects platform expansion. On the basis of individual user-level app usage data, we empirically demonstrated how the presence of a popular app alters the demand structure of a platform through changes in the usage of other apps operating within it. The findings reveal that popular app adoption by users increases the number of apps used and the duration of app usage, excluding the usage of popular apps, only within the platform offering a popular app. These results support the existence of positive spillovers from popular complement adoption on a platform. Such positive within-platform spillovers are derived from both backward spillovers onto existing apps adopted before popular app adoption and forward spillovers onto new apps to be adopted after the uptake of favored apps. These patterns suggest that positive spillovers of popular app adoption occur through both the increased retrieval of existing apps and reduced uncertainty about newly released apps. Furthermore, forward spillover is considerably stronger than backward spillover, implying that platform owners can reap benefits by coordinating the launch of new complements and the promotion of less-known counterparts to end users with the emergence of a popular app. These results shed light on how platform owners can manage their complements and create value beyond direct contributions from popular complements.

Keywords: digital platforms; popular complements; demand spillovers; mobile apps; Gaussian copula (search for similar items in EconPapers)
Date: 2023
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