Market Orchestrators: The Effect of Platform Certification on Complementor Performance and Behavior in the Context of Kiva (2010-2013)

Abstract

We study how a multisided platform’s decision to certify a subset of its complementors affects those complementors and ultimately the platform itself. Kiva, a microfinance platform, introduced a Social Performance badging program in December 2011. The badging program appears to have been beneficial to Kiva—it led to more borrowers, lenders, total funding, and amount of funding per lender. To better understand the mechanisms behind this performance increase, we study how the badging program changed the bundle of products offered by Kiva’s complementors. We find that Kiva’s certification leads badged microfinance institutions to reorient their loan portfolio composition to align with the certification and that the extent of portfolio reorientation varies across microfinance institutions, depending on underlying demand- and supply-side factors. We further show that microfinance institutions that do align their loan portfolios enjoy stronger demand-side benefits than certified microfinance institutions that do not align their loan portfolios. We therefore demonstrate that platforms can influence the product offerings and performance of their complementors—and subsequently the performance of the ecosystem overall—through careful enactment of governance strategies, a process we call “market orchestration.”