When Less Can Be More Setting Technology Levels in Complementary Goods Markets

Claussen, Jörg; Essling, Christian; Kretschmer, Tobias

doi:10.2139/ssrn.2376268

Cited by 22 publications

(31 citation statements)

References 32 publications

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“…Our paper contributes to several streams of literature. First, it adds to an emerging body of research on firm strategies in platform-based markets (e.g., Cennamo & Santalo, 2013, 2015Claussen, Essling, & Kretschmer, 2015;Eisenmann, Parker, & Van Alstyne, 2011;Kretschmer & Claussen, 2016;McIntyre & Srinivasan, 2017;Panico & Cennamo, 2015;Parker & Van Alstyne, 2005;Rochet & Tirole, 2003;Zhang, Li, & Tong, 2018;Zhu & Iansiti, 2012). A small number of empirical studies concern platforms' boundary decisions and focus on the consequences of platform-owner entry into complementary markets (e.g., Edelman & Lai, 2016;Li & Agarwal, 2017;Pierce, 2009;Wan & Wu, 2017;Zhu & Liu, 2018).…”

Section: Related Literaturementioning

confidence: 99%

Threat of platform‐owner entry and complementor responses: Evidence from the mobile app market

Wen

Zhu

2019

Strategic Management Journal

201

125

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Research Summary This paper studies the impact of platform‐owner entry threat on complementors in platform‐based markets. We examine how app developers on the Android mobile platform adjust innovation efforts (rate and direction) and value‐capture strategies in response to the threat of Google's entry into their markets. We find that after Google's entry threat increases, affected developers reduce innovation and raise the prices for the affected apps. However, their incentives to innovate are not completely suppressed; rather, they shift innovation to unaffected and new apps. Given that many apps already offer similar features, Google's entry threat may thus reduce wasteful development efforts. We discuss the implications of these results for platform owners, complementors, and policy makers. Managerial Summary We examine one prevalent source of conflict: platform owners' entry into complementary product spaces. We show that app developers on Google's Android system are strategic and nimble actors. They respond to the threat of Google's entry by adjusting both value‐creation and value‐capture strategies. We also show that platform owners could use direct entry to shape innovation directions and encourage variety of complements. Overall, on the one hand, Google's entry may have pushed complementors into other areas (which might be less lucrative) and strengthened its position in the mobile market. On the other hand, the entry may have reduced wasteful production efforts in the development of redundant applications. The overall welfare implication is thus ambiguous.

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Section: Related Literaturementioning

confidence: 99%

Threat of platform‐owner entry and complementor responses: Evidence from the mobile app market

Wen

Zhu

2019

Strategic Management Journal

201

125

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“…One implication is that complements are designed to look, feel, and perform the same across platforms, and there are no additional costs of specialization in the multihoming process. We challenge this assumption because platform architectures differ in the performance of their core functions (Anderson et al 2014;Zhu and Iansiti 2012), and in how they affect complement performance (Anderson et al 2014;Claussen et al 2015a). …”

Section: The Tradeoffs From Multihomingmentioning

confidence: 99%

“…When releasing new consoles, platform owners aim for high hardware power to push cutting-edge graphics games and attract both users and developers alike (Kretschmer and Claussen 2016, Claussen et al 2015a, Zhu and Iansiti 2012. Three main components of platform architecture affect hardware performance: CPU (including coprocessors), Graphics Processor (including co-processors), and RAM.…”

Section: What Characterizes a Complex Console?mentioning

confidence: 99%

Platform Architecture and Quality Trade-offs of Multihoming Complements

Cennamo

Özalp

Kretschmer

2018

Information Systems Research

Self Cite

188

142

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Multihoming -the decision to design a complement to operate on multiple platforms -is becoming increasingly common in many platform markets. Perceived wisdom suggests that multihoming is beneficial for complement providers as they expand their market reach, but it reduces differentiation among competing platforms as the same complements become available on different platforms. We argue that complement providers face tradeoffs when designing their products for multiple platform architectures -they must decide how far to specialize the complement to each platform technological specifications. Because of these tradeoffs, multihoming complements can have different quality performance across platforms. In a study of the US video game industry, we find that multihoming games have lower quality performance on a technologically more complex console than on a less complex one. Also, games designed for and released on a focal platform have lower quality performance on platforms they are subsequently multihomed to. However, games that are released on the complex platform with a delay suffer a smaller drop in quality on complex platforms. This has important implications for platform competition, and for managers considering expanding their reach through multihoming. The logic is that multihoming offers potential additional revenues at limited costs for complementors, implicitly assuming that complements are the same on different platforms. But many platforms are not simple (two-sided) markets enabling transactions; they are also technology infrastructures whose features shape the development of third-party complementary products (Anderson et al. 2014;Gawer 2014, Tiwana et al.2010, Yoo et al. 2010. 2 Complements frequently must be tailored to a platform's core technological functions and interface specifications to take full advantage of its performance (Anderson et al. 2014, Claussen et al. 2015b, Tiwana 2015. In developing for multiple platforms, complementors must decide how far to specialize the complement to one platform (Schilling, 2000, Tiwana 2015, Yoo et al. 2010. We ask how the tradeoffs complementors face when designing products for multiple platforms affect the quality performance of multihoming complements across platforms. , Tiwana et al. 2010, Gawer 2014. As a system comprises the platform and its complements, the effect of platform architecture on both platform performance and complement supply matters for value creation at the system level (Cennamo 2016). the core technology components (e.g., processor cores), and the larger the number of specialized processors requiring a specific programming language for optimal utilization (i.e., no clean interface to handle the interdependencies), the more complex the platform. Complement developers must therefore choose to either use that language to optimally "conform" (Tiwana 2015) to the complex platform's specifications at the expense of integration and performance on other platforms, or to design the complement so it uses the lowest common denominator acr...

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“…Whether in videogames, smartphones, or enterprise IT systems, platforms are embedded in highly innovative ecosystems and evolve through intergenerational technological transitions, whereby the next generation of platform technology can offer greater benefits to users to the extent that they can enjoy better complements (Cennamo, 2016;Claussen et al, 2015). For instance, a videogame console transitioning from 2D to 3D graphics capability can offer users a more immersive gaming experience by depicting more realistic game-worlds, and can also benefit complementors by providing them with a new technology for developing better games that are potentially more appealing to users (de Vaan, 2014).…”

Section: Introductionmentioning

confidence: 99%

Disruption in Platform‐Based Ecosystems

Özalp

Cennamo

Gawer

2018

J Management Studies

164

131

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We study intergenerational platform-technology transitions as instances of potentially disruptive innovation at the ecosystem level. Examining the launch of 12 platform technologies in the U.S. videogame industry covering three console generations from 1993 until 2010, we show that incumbents introducing next-generation platform technologies with advanced capabilities increase the challenges of developing complements for the platform technology, steepening complementors' learning curves and disrupting the very same complementors that platform owners need to thrive in the next-generation competition. We find that, because of these struggles, platforms with advanced capabilities but high complement-development challenges show a pattern of defection of complementors toward rival, less challenging platforms. Our study extends mainstream disruptive-innovation theory to the context of platform-based ecosystems by offering a systemic view that accounts for disaffection on the part of technology complementors-rather than end users-as the main reason for disruption.

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When Less Can Be More Setting Technology Levels in Complementary Goods Markets

Cited by 22 publications

References 32 publications

Threat of platform‐owner entry and complementor responses: Evidence from the mobile app market

Threat of platform‐owner entry and complementor responses: Evidence from the mobile app market

Platform Architecture and Quality Trade-offs of Multihoming Complements

Disruption in Platform‐Based Ecosystems

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