Platform Owner Entry Into Complementor Spaces Under Different Governance Modes

by Prof. Hye Young Kang
Division of International Studies
hyekang@ewha.ac.kr

Prof. Hye Young Kang’s work titled " Platform Owner Entry Into Complementor Spaces Under Different Governance Modes " was recently published at Journal of Management (2022 Journal Impact Factor = 13.5, JIF Rank = 6/227 in Management). The paper, in collaboration with Prof. Fernando Suarez at Northeastern University, explores an increasingly important yet underexplored research question of how platform owner entry into its complementor spaces affects the performance of complementors on digital platforms.

The phenomenon of a platform owner entering its complementor spaces has been growing and, given its potential impact on the dynamics of competition in platform-mediated industries, has captured the interest of entrepreneurs, scholars, and policy makers. However, empirical studies on the consequences of such platform owner entry have been scant so far and have shown contradictory findings—some studies find positive effects on complementor performance, while others find negative effects. The present paper attempts to address this puzzle in existing studies by relaxing an implicitly held assumption— namely, that the “mode of entry” is basically the same in each case of owners entering complementor spaces. The paper brings to the fore the possibility that how an owner enters its complementor spaces determines the level of competitive pressure it exerts on the affected complementors, which in turn ultimately determines the valence of that impact. The paper further highlights that the specific mode of entry that a platform owner deploys when entering a complementor market is likely to reflect the platform’s approach to governance since platform governance is conceptualized as a stable attribute of platforms encompassing a wide array of platform-wide practices and strategies. Therefore, these findings help explain apparent contradictions in prior studies and extend the understanding of this increasingly common phenomenon in platform-mediated industries.

Using a unique panel dataset of health and fitness mobile apps in the Apple iOS and Google Play store, this paper finds that the mode of entry plays a significant role in the resulting complementor dynamics. More specifically, aligned with theorizing, the paper finds contrasting modes of entry and resulting dynamics that arise between a platform that follows a closed and reigning approach to governance and one that follows an open and laissez-faire approach. The platform that follows a closed and reigning approach to governance enters its complementor space more aggressively, tightly controlling the access to and usage of its product and technologies. Such an entry mode increases competitive pressure on complementors and can ultimately be detrimental to their performance. In addition, it can lead those complementors to disengage from investing in the focal and adjacent markets where they perceive the risk of owner competition. In contrast, the platform that follows an open and laissez-faire approach to governance enters complementor spaces less aggressively, ceding to complementors decision rights and control of the access and usage of its product and its underlying technologies. Such an entry mode will likely produce positive spillover effects for complementors, leaving them ample room to leverage the owner’s offerings to their advantage. This can ultimately result in a positive influence on the product performance of the affected complementors and, in turn, increase their level of engagement in their focal and adjacent markets, given the heightened opportunities for value appropriation.

The present paper sheds light on the platform literature by integrating two increasingly important strands of platform research—namely, literature on platform governance and research on platform owner entry into complementor spaces—, which have not been crossfertilized before. The study highlights the nuanced tension, which comes with distinctive strategies of platform governance, between value capture and platform growth.

Overall, responding to recent calls to explain a conundrum in prior research that documents platform owner entry having different, sometimes opposite effects on complementors’ performance, this study contributes to the finer understanding of a growing phenomenon, platform owner entry into complementor spaces. The paper unravels a crucial condition associated with the valence and extent of the consequences of such a move, providing novel insights into the study of intra-platform competition and dynamics.

* Related Article
Hye Young Kang, Fernando F. Suarez Platform Owner Entry Into Complementor Spaces Under Different Governance Modes, Journal of Management, Vol. 49(5), 1766-1800, May, 2023