Platform Categorization and Complement Performance: Evidence from Mobile Apps

Managing complement heterogeneity has a salient impact on value creation in platform markets, but remains largely underexamined in the platform governance literature. Local homogenization (i.e., increasing complement homogeneity within a product category) can improve customer-complement matching efficiency, without weakening the network effect of the entire platform market. However, although local homogenization enables customers to better identify potentially fitted complements, the presence of more fitted complements makes customers more selective in making payments. Thus, we hypothesize that local homogenization increases digital complements’ new installs, but reduces revenue generation from each installed customer. By exploiting the removing of shopping mobile apps from the lifestyle category on Apple’s App store as an exogenous shock which increases local homogeneity of the lifestyle category, our empirical findings support for our propositions. Since new installs and revenue are both strategically important for digital complementors, this research illustrates a nuanced relationship between platform categorization and complement performance.