Competing with complementors: An empirical look at Amazon.com

Abstract

Research Summary: Platform owners sometimes enter complementors' product spaces and compete against them. Using data from http://Amazon.com to study Amazon's entry pattern into third‐party sellers' product spaces, we find that Amazon is more likely to target successful product spaces. We also find that Amazon is less likely to enter product spaces that require greater seller efforts to grow, suggesting that complementors' platform‐specific investments influence platform owners' entry decisions. While Amazon's entry discourages affected third‐party sellers from subsequently pursuing growth on the platform, it increases product demand and reduces shipping costs for consumers. We consider the implications of these findings for complementors in platform‐based markets. Managerial Summary: Platform owners can exert considerable influence over their complementors' welfare. Many complementors with successful products are pushed out of markets because platform owners enter their product spaces and compete directly with them. To mitigate such risks, complementors could build their businesses by aggregating nonblockbuster products or focusing on products requiring significant platform‐specific investments to grow. They should also develop capabilities in new product discovery so that they could continually bring innovative products to their platforms.

The Economics of Classroom 3-D Printing of Open-Source Digital Designs of Learning Aids

“…An Amazon equivalent was also needed to accompany the aid in order for it to be chosen for testing. Amazon was selected here as the retailer because of its well-established competitive approach, which reduces costs for consumers [60][61][62] and has made it one of the world's largest retailers. The URLs for the open-source designs as well as the corresponding Amazon products are available in Appendix A.…”

Big tech, knowledge predation and the implications for development

“…Digital intelligence has contributed to make its e-commerce platform a marketplace that is attractive to third-party sellers. Digital intelligence also contributes to strategic decision making processes regarding acquiring or entering successful businesses of third-party sellers (Galloway 2017;Lan, Liu, and Dong 2019;Zhu and Liu 2018).…”

Product Quality and Entering Through Tying: Experimental Evidence

“…Platform-based markets often rely on complementary applications to solve a chicken-and-egg problem: without an existing base of users, no complementors are interested in providing complements, and without complementary applications, no consumers are interested in adopting the platform (Rochet and Tirole (2003), Hagiu and Spulber (2013)). However, after a platform has taken off, it may have various reasons to offer complementary products directly, such as motivating better quality products by introducing competition, or capturing additional value by imitating successful complementors (Gawer and Cusumano (2002), Gawer and Henderson (2007), Jiang et al (2011), Zhu and Liu (2018)).…”