Complementor strategies in smartphone application markets

Abstract

A large and increasing share of global economic activity takes place in ecosystems organized around platforms through which distinct groups conduct transactions. Smartphone application (app) markets are an increasingly important example, offering software developers a large, heterogeneous installed base of users as potential customers and low barriers to entry. However, these low barriers to entry result in intense competition for user attention, downloads, and revenues, while the appropriability regime is generally weak. In platform ecosystem settings such as this, how do producers of complementary goods and services (complementors) seek to compete, and which strategies are effective? To explore these questions, I collected rich qualitative data on 44 apps created for the Windows Phone store during their development period, as well as objective, quantitative measures of their performance post-release. The results of a qualitative comparative analysis of the cases show that developers choose to compete on combinations of novelty, execution, and owned or accessed (third-party) complementary assets, and suggest that developers over-estimate the advantages of the latter two options. These findings raise questions about what kinds of specialized complementary assets and demand-size strategies can be the basis for competition in platform ecosystems of this kind.