Capacity‐constrained entrepreneurs and their product portfolio size: The response to a platform design change on a Chinese sharing economy platform

Abstract

Research summary How do entrepreneurs on a sharing economy platform (SEP) with a limit to aggregate output (capacity constraints) respond to a platform design change emphasizing buyer feedback? Not all supply‐side complementors can diversify or scale their offerings. Focusing on those who can change the former, but not the latter, we examine how entrepreneurs change their product portfolio size after the platform design changed to emphasize buyer feedback. We found that their product portfolio size decreased following the change, and more so for those with more positive feedback. While the sales increased for entrepreneurs after the change, buyer feedback deteriorated. Our results show how SEPs in emerging economies can foster entrepreneurship and elucidate the importance of nonscale‐free resources of supply‐side entrepreneurs to better understand platform dynamics. Managerial summary Do sellers change the number of products on offer when the app owner rewards sellers with high user ratings? While research has examined how sellers adjust the number of products to get high ratings, little attention has been paid to sellers with capacity constraints. This is problematic, as sellers on sharing economy apps often have a limit on the total quantity of products they can produce. Using data from a Chinese home cooked meal selling app, we show that sellers decreased the number of products they sell when the app owner began to reward high user ratings. The decrease was more pronounced for sellers with higher ratings. As a result, sales revenue increased, but user ratings decreased. Implications for practitioners and policymakers are discussed within.

Market Orchestrators: The Effects of Certification on Platforms and Their Complementors

“…Combined, these findings suggest that FCE-badged MFIs shift their portfolio composition to include a larger share of female borrowers rather than adding loans or borrowers to their portfolios. This finding is consistent with our theoretical arguments (and with Lu 2012 andTae et al 2020).…”

“…We further find that specialist complementors (those with concentrated product portfolios) reorient their product portfolios less than generalist complementors (those with dispersed product portfolios). We interpret these results to suggest that there are limits to the extent that platforms can influence the behavior of their complementors: from the complementor's point of view, demand-and supply-side factors enable and constrain their response to the platform's certification-a set of results that we believe is generalizable across most platforms (also see Tae et al (2020)). The mechanism through which certified complementors that realign their portfolios benefit is driven primarily by the demand side; these complementors benefit from more lenders, more money paid, and more money paid per lender.…”

“…Note that our argument relies on the assumption that complementors offer a finite number of products (or loan projects in our Kiva example). Therefore, portfolio reorientation requires them to shift existing resources to a different product category, rather than adding more products to the portfolio (also see Lu 2012 andTae et al 2020). We therefore expect the following.…”

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

“…Given the two-sidedness or multi-sidedness of platforms, platform value could rely heavily on the interdependence between complementors and customers. Such interdependence implies that the platform owner-complementor relationship could have significant spillover effects on customers Tae, Luo, & Lin 2020). Spillover effects have been primarily subsumed into the analysis of platform performance, as researchers employ customer-related metrics (e.g., ratings, reviews, number of active customers) in assessing the performance impact of specific governance and design features.…”

Platform Competition: A Systematic and Interdisciplinary Review of the Literature

“…By manipulating how much value is captured by individual complementors, a platform hub can both reward loyalty and prevent complementors from becoming so powerful that they are able to extract more value from the platform (Brandenburger, Kou, & Burnett, 1995;Rietveld et al, 2019). A platform's governance strategies can also influence complementor pricing (e.g., Dinerstein et al, 2018;Yoffie & Kwak, 2006), investments in quality (Cennamo et al, 2018), product-market positioning strategies (Rietveld, Seamans, & Meggiorin, 2018;Tae, Luo, & Lin, 2020), the incentives and penalties for complementors to engage in bad behavior (e.g., Geva, Barzilay & Oestreicher-Singer, 2017;Sampler, 2018), the degree to which complementors cooperate with one another and share knowledge and other resources to increase innovation (e.g., Huang, Tafti, & Mithas, 2018;Perrons, 2009;Zhang, Li, & Tong, in press), and more. Finally, recent research has begun to explore how a platform ecosystem's needs, and consequently its governance strategies, evolve over time (e.g., Hannah & Eisenhardt, 2018;Huber et al, 2017;Kyprianou, 2018;O'Mahony & Karp, in press;Rietveld et al, 2020).…”