Untangling Product Complexity on Digital Platforms: Implications for Platform Complementors

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Platform-mediated industries have created large markets for complementor firms, resulting in vigorous intra-platform competition among them. On digital platforms, complementor competition tends to focus on products (end users often know the product name but not that of the complementor). Product strategy in platform complementor markets is therefore an important yet understudied topic. A key product strategy dimension is that of product complexity because adding features on digital platforms is facilitated by the intrinsic flexibility of software-based products and low appropriability regimes. Moreover, extant research suggests that product features are a major determinant of the level of demand for a complementor product. This paper addresses this research gap by exploring how product complexity affects the performance of digital platform complementors. We examine complementors’ performances from two perspectives, namely demand and operations, because it is the combination of the two that ultimately drives the impact on complementors’ performances. With regard to demand, we argue that product complexity has a positive association with perceived product quality, but an inverted U-shaped relationship with consumers’ product engagement. With regard to operations, we contend that product complexity increases the frequency of product maintenance while decreasing the speed of product adaptation to platform-wide changes. We test our hypotheses empirically in the context of a health and fitness application ecosystem in the Apple iOS App Store via a multi-method approach. We run panel data analyses on a manually collected dataset, supplemented with two online experiments to explore the underlying mechanisms behind our arguments, and to address endogeneity concerns.