Managing Platform Ecosystem: Two Empirical Studies on Platform Owner's Entry
Abstract
A platform ecosystem emerges when the platform owner integrates individual offerings by complementors to create value addressing consumer preferences. Typically, platform owner operates the marketplace, matching complementors’ products with consumers; more recently, many platform owners have entered the complementary market by selling products to consumers. Despite the prevalence of platform owner’s entry, there are still underexplored aspects of complementors’ response and limited research on platform-complementor interplay concerning the value creation of the platform ecosystem. In refsponse to these research gaps, this thesis presents two empirical studies.
Study I focuses on complementors’ product offerings, the key basis for the value creation of platform ecosystem. Platform owner’s entry blurs threats and opportunities, making it challenging for complementors to discern the exact nature of platform’s expectations and the implications for their products. In light of this uncertainties and limited information access for complementors, we examine how complementors respond in their product strategy. Leveraging a matched sample of complementors that spanned 12 months from Amazon.com, we find a far-reaching impact on complementors’ products, as opposed to the incomplete view on a certain category of platform owner’s entry. Specifically, complementors are averse to new products, opting instead for products with previous sales experience. They also refine product variety, coupled with distinct product differentiation tactics to position away from platform owner while imitating other complementors. We add to the scant work on complementors’ strategy by elucidating their dependence on experience and peer observations to navigate uncertainties. Noteworthy, complementors’ strategy, shaped by limited information access, may inadvertently limit creativity and diversity, emphasizing how complementors’ circumstances affect the outcomes of platform management.
Study II examines value creation for platform consumers depending on collective efforts of the ecosystem. Platform owner’s entry may contribute to platform growth but may also pose competition to complementors. When platform ecosystem cohesion is challenged, value creation may be impacted. We focus and theorize on how platform owner’s entry might weaken platform-complementor alignment through value misappropriation, hindering value creation in platform ecosystem. Evidence from 69,688 entry events by Amazon.com during 2016-2018 supports a negative effect that consumers perceive a lower value from the platform after platform owner’s entry. Examinations of potential misappropriations suggest a more pronounced negative effect of complementors’ freeriding rather than platform owner’s ex-post squeeze. Driven by the demand increase after platform owner’s entry, a number of complementors follow platform owner into the product markets with stronger incentives to reap private benefits but lower contributions to value creation, in which consumer value decreases to a greater extent. We underscore complementors’ misappropriation as a notable explanation for value decrease, challenging the conventional notion of complementors’ avoidance often ascribed to the misappropriation of the platform itself.
This thesis adopts an ecosystem framework to explore the implications of platform owner’s entry. Findings from the two studies emphasize the significance of strategic communication and collective alignment in managing complementors and their products for value creation.