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

Wen Wen () and Feng Zhu ()
Additional contact information
Wen Wen: University of Texas at Austin, McCombs School of Business, 2110 Speedway, Austin, TX 78712
Feng Zhu: Harvard University, Harvard Business School, Morgan Hall 431, Boston, MA 02163

No 16-10, Working Papers from NET Institute

Abstract: How do complementors respond to the threat of platform owner entry, and how do such responses differ from the responses to actual entry? Using the mobile platform Android as our research setting, we examine how app developers on 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. Based on a difference-indifferences empirical framework, we find that app developers that are affected by Google’s entry reduce their innovation efforts on affected apps after entry threats increase; after Google’s actual entry, they reduce innovation efforts on affected apps further and also increase these apps’ prices. However, we find that affected app developers do not withdraw from the platform completely—once the threat occurs, they shift innovation efforts from affected apps to other unaffected apps, as indicated by an increase in updates on unaffected apps during both the entry-threat and actual-entry period.

Keywords: platform owner entry; entry threat; innovation; mobile app industry (search for similar items in EconPapers)
JEL-codes: L11 L86 O32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2016-09
New Economics Papers: this item is included in nep-com, nep-ino and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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