Platform Governance Design in Platform Ecosystems: Implications for Complementors’ Multihoming Decision

Abstract

Extant platform research focuses on how platform owners’ governance behaviors directly affect complementors. This study explicates the multilateral interdependence among different groups of producers within a platform ecosystem. We theorize about how platform owners’ governance design may create frictions between platform providers and complementors. While open governance grants greater autonomy to platform providers, it also cultivates a more complex ecosystem for complementors. Since ecosystem complexity raises the cost of product customization, complementors will be less willing to port an existing complement to a more complex ecosystem, that is, less likely to multihome. The negative effect is weakened as the complementor has greater experience with the destination ecosystem or when the complement exhibits a greater level of modularity. Our analysis of newly launched apps in Apple’s iOS and Google’s Android smartphone ecosystems finds supportive evidence. We discuss implications for the burgeoning literature on platform ecosystems and complementors.

Governance and Design of Digital Platforms: A Review and Future Research Directions on a Meta-Organization

“…Deciding on the degree to which digital platform owners should grant access to complementors is like "balancing on the head of a pin." On the one hand, a stream of research illustrates that granting access to complementors boosts platform adoption (West, 2003) by lowering the entry barrier and contributes to value creation through network effects (Boudreau, 2010;Chen et al, 2020a;Jarvenpaa & Lang, 2011;Parker & Van Alstyne, 2005). Specifically, as the number of complementors increases, the platform will be infused with heterogeneous knowledge and capabilities (Cennamo, 2018;Li & Netessine, 2020;Tanriverdi̇ & Lee, 2008), which can provide an incubator for technological innovation and product variety expansion.…”

“…When delegation of decision rights is enacted through the licensing of the platform's core intellectual property rights (Eisenmann, 2008;Eisenmann, Parker, & Van Alstyne, 2009), it enables various platform providers (e.g., smartphone producers) to manage the interface through which customers consume complementary products and experience the platform (e.g., as is the case of Android). Transforming a proprietary design into a more open design (e.g., open-source licensing of Android) can induce enhanced specialization and provide greater protection of complementors' interests (West, 2003), yet there is a tradeoff between platform openness and complexity, in that an open interface may breed a more complex ecosystem that raises the development cost for complementors and could reduce their platform-specific investment (Chen et al, 2020a). An open design can also impair the platform owner's ability to appropriate value (Karhu, Gustafsson, & Lyytinen, 2018).…”

“…On the one hand, complementors will benefit from sponsoring more than one platform, as multihoming helps them reach more customers and avoid the risk of ex post holdup by platform owners (Koh & Fichman, 2014;Tavalaei & Cennamo, 2020;Wang & Miller, 2020). On the other hand, complementors may find multihoming less attractive if highly specific technologies and/or noncontractible costs are required to develop products for particular platforms (Cennamo, Ozalp, & Kretschmer, 2018;Chen et al, 2020a). Thus, platform owners must carefully apply governance mechanisms so that complementors have limited incentives to multihome.…”

“…In the meantime, a new perspective is under fast development that departs from the prevailing framing, in that it more explicitly conceptualizes a platform and the related complementors as creating a unique organizational form or a "meta-organization" (Gawer, 2014;Kretschmer, Leiponen, Schilling, & Vasudeva, 2020;McIntyre, Srinivasan, Afuah, Gawer, & Kretschmer, 2020). This organization-centric perspective emphasizes the interdependence between platforms and complementors-that is, how platform owners manage relationships with complementors and how the collective actions by complementors and partner firms determine the success of the platform (Chen, Yi, Li, & Tong, 2020a). 1 Notably, Kretschmer et al (2020) provide a compelling account of how platforms resemble hybrid organizations that are familiar to strategy and management scholars.…”

Experience base, strategy‐by‐doing and new product performance

“…Apps with a larger size are likely to have more features and functionalities, affecting their attractiveness to users (Ghose & Han, 2014). Since affiliation with multiple platforms may pose challenges regarding resource allocation (Chen, Yi, Tong, & Li, 2020), we further controlled for the impact of multihoming , a dummy variable indicating whether an app is available on both iOS and Android platforms. In order to control for the fixed effect of category, we constructed a dummy variable, category dummy .…”