Juan Santaló

Multisided platforms crucially rely on indirect network effects. When trying to strengthen these effects, platform owners face a fundamental challenge, namely, designing incentives to enhance developer effort and simultaneously ensuring the release of high-quality products on the platform. This paper highlights the costs associated with lowering royalty rates to boost developer effort, as such reductions increase the relative supply of lower-quality offerings, worsening information congestion problems and amplifying the importance of visibility-enhancing investments. We leverage the quasi random announcements made by Apple and Google, declaring their intention to reduce the royalty rate applied to small app developers from 30% to 15%. We analyze the implications of these reforms using a difference-in-differences approach, finding a substantial increase in small developers’ likelihood of releasing lower-quality and less original apps on iOS and Android after the announcements. These effects are neither paralleled by a comparable increase in high-quality app releases nor by an increase in small developers’ likelihood of launching venture-backed apps. Consistent with worsening information congestion problems because of an influx of low-quality apps, our findings show an increase in the marginal value of experienced user certifications and developers’ app store optimization efforts post announcement. Additionally, we observe that venture capitalists are increasingly concentrating their investments in ventures with higher (observable) quality. This paper was accepted by Anita McGahan, business strategy. Funding: This work was supported by the Spanish Ministry of Education [Project PID2022-138710NB-I00 funded by MCIU/AEI/10.13039/501100011033/FEDER, UE]. A. Conti acknowledges financial support from the Swiss National Science Foundation [Grant 100013_197807]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.0586 .

Research Summary: We show that multi‐business firms pursuing technologically related diversification often face a paradox. While such strategies can yield superior financial performance through technological synergies, investors with limited attention tend to undervalue them due to their complexity. Using asset pricing methods, we find that these firms consistently outperform market expectations. The degree of mispricing depends on investor attention and the availability of information needed to assess the strategy's value. Our findings highlight how informational frictions can distort market valuations of complex corporate strategies.Managerial Summary: Firms diversifying across technologically related businesses may unlock significant value through synergies—but this value is often missed by investors. The complexity of these strategies challenges investor understanding, leading to market undervaluation. We find that improving how firms communicate their technological capabilities—such as using clearer, more familiar language in patent disclosures—can enhance investor recognition and improve market valuations.

This chapter offers a review of the platform literature, focusing on the strategic trade-off between two distinct approaches: the 'Grand Bazaar' strategy and the 'VIP Club' strategy. The 'Grand Bazaar' strategy seeks to maximize the number of transactions and participants, fostering openness and liquidity, while the 'VIP Club' strategy emphasizes exclusivity and high-value interactions, prioritizing quality over quantity. In examining this trade-off, the chapter reviews the broader spectrum of platform differentiation strategies, highlighting how platforms can position themselves in response to competitive pressures and user expectations. By synthesizing insights from the literature, the chapter provides a framework for understanding how platforms balance growth, differentiation, and value creation. It concludes with a discussion of future research opportunities, outlining critical questions and potential directions for advancing the study of platform strategies.

Multisided platforms face a fundamental trade‐off: should they ease entry for a larger number of providers of complementary products or services (complementors) to join the platform and benefit from cross‐side network externalities, or should they limit entry to maintain complementors’ incentives to provide high‐quality offerings? We contend that a specific cross‐subsidizing pricing strategy – where the amount of subsidy to complementors is explicitly linked to the overall revenue they generate on the other side of the platform – may mitigate this trade‐off. Using data from the airport industry, we demonstrate that following a reduction of airlines’ entry barriers, airports that subsidize airlines, based on the aforementioned scheme, can boost their financial performance and maintain traffic composition in favour of legacy airlines, which bring passengers who spend more in airport shops. Our findings shed light on how cross‐subsidization may balance the variety and quality of complementors and their offerings on multisided platforms.

In November 2020, Apple announced a reduction in the royalty rate applied to small app developers from 30% to 15%. In March 2021, Google followed suit committing to a similar reform. We analyze the implications of these reforms for the distribution of app quality with a stylized model that assumes heterogeneity in the ability to develop apps. After Apple’s announcement, we empirically find a substantial increase in the number of new apps released on the iOS and Android platforms by solo developers, who supposedly are more likely to conform to the definition of “small app developers.” The launched apps are in the lowest quartile for the number of upvotes and ratings received, indicating a surge in low-quality apps. Consistently, we find that -as a result of the reforms- the likelihood of solo developers launching apps that turn into new ventures declines. We finally show that post-reform, the marginal value of quality certification by external, experienced users increases, suggesting that there are potential costs associated with the increased supply of low-quality apps. We discuss the implications for platform governance and regulation.

Research on organizational ecosystems and multi-sided platforms has recently attracted a lot of scholarly interest. The structure of technological interdependencies varies across ecosystems, result...

The Digital Markets Act makes clear choices about important tradeoffs in value to constrain the arbitrary power and dominance of gatekeepers over digital markets and guarantee a more equitable distribution of value with business users. We argue that the extent those objectives will be realized depend largely on the nature of competition, both the type of competition (within vs. across platforms) and the competition dynamics (Winner-Take-All vs. differentiation). We anticipate that the choices about the tradeoffs in value taken in the DMA will prevent gatekeepers to monopolize the focal market but in very limited cases. This is because the DMA seems to protect specific competitors (some large business users against gatekeepers) rather than competition, as well as protecting only one type of competition (within platform) instead of also, and the more salient for contestability in digital markets, cross platform competition. We discuss these tradeoffs and the implications for competition, value distribution and welfare.

We consider the merits of the recent EU’s Digital Markets Act from the perspective of innovation and value creation. We conceptualize innovation as new interactions being created by the digital platform leading to ‘value creation’, in contrast to facilitating existing interactions or market transactions, which we conceptualize as coordination between business users and end-users leading to ‘value exchange’. We apply this innovation perspective to the DMA to assess two of the most contentious provisions: self-preferencing and data-sharing. We show how these practices reveal great heterogeneity regarding the extent to which they facilitate innovation (and thus value creation) or only affect redistribution of value depending on whether they replace existing interactions (little to negative innovation effect), sustain existing interactions (moderate, positive innovation effect), or they trigger new interactions (large, positive innovation spillovers).

Research Summary: Whether diversified firms have advantages over their single‐business counterparts is the focus of much research in strategic management. Indeed, there is sparse evidence that corporate advantage exists, on average. We explore one potential driver of corporate advantage—that multi‐business firms have more flexibility than single‐business firms to cope with uncertainty, because they can internally redeploy resources across businesses. Using Compustat data, we show that uncertainty increases the relative advantage of multi‐business firms, a finding robust to controls for endogeneity. Consequently, the paper provides important insight and evidence around when corporate advantage might obtain. Moreover, we find that growth option value is accentuated in the presence of switching flexibility. Finally, multi‐business firms with redeployment experience and businesses with more inversely correlated returns benefit more from uncertainty. Managerial Summary: Multi‐business firms have a flexibility advantage over single‐business firms as they can reallocate firm resources from one business unit to another depending on inducements. What is the impact of this flexibility on firm value? In this paper, we test whether such a flexibility advantage translates into greater economic returns in more volatile markets. We expect that resource redeployment creates value if it amplifies business‐specific positive shocks while alleviating business‐specific downturns. Consistent with this argument, we find empirical evidence that with increasing stock market volatility, multi‐business firms benefit significantly more in terms of firm value than their single‐business counterparts. In particular, in highly volatile stock markets, monthly adjusted returns are 2.3 times higher for multi‐business firms than for single‐business firms.