USC Marshall

Competition at the platform-level coevolve with that at the complementor level—while complementors’ cross-platform mobility affects platform level success, the uncertainty surrounding the emergence of dominant platform also affects complementors’ mobility decisions. In this study, we investigate the impact of the installed bases between Android and iOS on mobile developers’ decisions to move across platforms. We argue that Apple’s iOS pursued a more quality-driven strategy, and thus as Android catches up with iOS in terms of growing installed bases (of both hardware and software), there are uncertainties regarding which of the two will become the dominant platform. As the market evolves, however, it becomes clear that iOS can sustain its competitive advantages despite the smaller market share. We find the increasing gap between installed bases of Android and iOS has an inverted-U effect on iOS developers’ likelihood of moving to Android. Moreover, low performers and younger app-developers on iOS are more sensitive to such uncertainties and thus have been the primary contributors to the inverted-U shaped mobility pattern. In contrast, mobility from the Android to the iOS market does not show the same or a directly opposite pattern. Superior performance is more important for developers moving from Android to iOS (than the other direction of developers moving from iOS to Android). This is because mobility from the quantity-driven platform (Android) to the quality-driven one (iOS) is mainly motivated by the desire to target at a more lucrative, though more demanding, platform market, thus needs to be facilitated by higher performance.

We study the impact of acquisitions on subsequent market entries by complementors and their product performance in a platform-based market. While acquisitions signal market growth potential, they can also intensify market competition if large firms leverage network effects and become more competitive through such acquisitions. In an empirical study of 966 acquisitions on category entries of 281,771 app developers in the iOS mobile platform from 2008 to 2015, we find that acquisition intensity in a product category increases market entries, but that inexperienced developers make most entries. In contrast, experienced developers are less likely to enter product categories with intense acquisitions. In addition, products that are released at the same time as intense acquisitions in the focal category fare worse, experiencing shorter lifespans and a greater likelihood of failure. This negative effect is then amplified in categories with stronger network effects. Our paper contributes to the literature on platform-based markets by showing that acquisitions amplify network effects, which in turn intensify market competition. We also demonstrate the usefulness of the behavioral theory in explaining complementors’ strategic decision-making when facing market uncertainties.