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Platform Architecture and Quality Trade-offs of Multihoming Complements

Carmelo Cennamo¹; Hakan Ozalp²; Tobias Kretschmer³

¹ Department of Management and Technology, Bocconi University, 20136 Milano, Italy · ² Leeds University Business School, University of Leeds, Leeds LS2 9JT, United Kingdom; · ³ ISTO, Munich School of Management, LMU Munich, 80539 Munich, Germany; and Center for Economic Policy Research, London EC1V 0DX, United Kingdom

Multihoming, the decision to design a complement to operate on multiple platforms, is becoming increasingly common in many platform markets. Perceived wisdom suggests that multihoming is beneficial for complement providers as they expand their market reach, but it reduces differentiation among competing platforms as the same complements become available on different platforms. We argue that complement providers face trade-offs when designing their products for multiple platform architectures—they must decide how far to specialize the complement to each platform’s technological specifications. Because of these trade-offs, multihoming complements can have different quality performance across platforms. In a study of the U.S. video game industry, we find that multihoming games have lower-quality performance on a technologically more complex console than on a less complex one. Also, games designed for and released on a focal platform have lower-quality performance on platforms they are subsequently multihomed to. However, games that are released on the complex platform with a delay suffer a smaller drop in quality on complex platforms. This has important implications for platform competition, and for managers considering expanding their reach through multihoming. The online appendix is available at https://doi.org/10.1287/isre.2018.0779 .

DOI

10.1287/isre.2018.0779

Volume

29 (2)

Pages

461-478

Language

en

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BibTeX

Sources

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