Comparing Platform Owners’ Early and Late Entry into Complementary Markets

Abstract

Research on platform owners’ entry into complementary markets points in divergent directions. One strand of the literature reports a squeeze on post-entry complementor profits due to increased competition, while another observes positive effects as increased customer attention and innovation benefit the complementary market as a whole. In this research note, we seek to transcend these conflicting views by comparing the effects of the early and late timing of platform owners’ entry. We apply a difference-in-differences design to explore the drivers and effects of the timing of platform owners’ entry using data from three entries that Amazon made into its Alexa voice assistant’s complementary markets. Our findings suggest that early entry is driven by the motivation to boost the overall value creation of the complementary market, whereas late entry is driven by the motivation to capture value already created in a key complementary market. Importantly, our findings suggest that early entry, in contrast to late entry, creates substantial consumer attention that benefits complementors offering specialized functionality. In addition, the findings also suggest that complementors with more experience are more likely to benefit from the increased consumer attention. We contribute to platform research by showing that the timing of the platform owner’s entry matters in a way that can potentially reconcile conflicting findings regarding the consequences of platform owners’ entry into complementary markets.