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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Wen Wen & Feng Zhu, 2016. "How Do Complementors Respond to the Threat of Platform Owner Entry? Evidence from the Mobile App Market," Working Papers 16-10, NET Institute.
  • Handle: RePEc:net:wpaper:1610
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    File URL: http://www.netinst.org/Wen_16-10.pdf
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    References listed on IDEAS

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    1. repec:kap:sbusec:v:50:y:2018:i:3:d:10.1007_s11187-017-9883-5 is not listed on IDEAS

    More about this item

    Keywords

    platform owner entry; entry threat; innovation; mobile app industry;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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