Events

Mr. Tommy Pan Fang
PhD Candidate in Business Administration
Harvard Business School

A considerable body of work has examined how platforms govern complementors—third-party firms who offer complementary products and services that enhance the overall ecosystem value. Yet, platform owners need to capture a share of the ecosystem value to remain viable. Platform owners, thus, face a conundrum in governance design: encouraging complementor value creation for the platform ecosystem, while finding ways to capture value simultaneously. In this paper, I capture this critical tradeoff that platform owners face by examining how platforms govern complementors’ business models—the value creation activities and value capture methods of a complementor. I conduct a large-scale quantitative study of 15,604 mobile applications in 2021, supplemented with a program of qualitative interviews. I leverage an unexpected Apple policy impairing in-app advertising business models of complementors, and find that these applications are more likely to exit from the platform after the policy change. Moreover, impacted applications shift effort from developing new features to fixing existing issues, diminishing the overall value creation. While this change negatively affected the revenues that Apple received from third-party applications, Apple was able to increase value capture from its own applications and advertising network. These findings enrich our understanding of how platform owners use governance to balance between value creation and value capture in an ecosystem.