Successful, but not Too Much: Managing Platform Complementors in the Presence of Network Effects

Firms that own platforms often actively manage firms that offer products through the platform (i.e., platform complementors). To manage complementors, platform owners tend to have fewer tools available at their disposal relative to traditional organizations. Prior work has started examining how platform owners achieve both value creation and appropriation using novel tools such as product endorsements. We extend the literature by developing a theoretical framework on the role of direct network effects of the products introduced through the platform. We test our predictions using a detailed dataset of game apps introduced on the Apple’s app store and examine which apps received Apple’s prestigious Editors’ Choice Awards given at the time of introduction. We find that apps with network effects are more likely to receive the award. This likelihood increases when the app is introduced by a developer with a larger market share but is lower if the app was introduced in a concentrated segment. The likelihood decreases further if the app is introduced in a concentrated segment by a developer that holds a larger market share. We also observe that in concentrated segments, the “challenger” developers have a higher likelihood of receiving the award relative to