Abstract
We add a new dimension to the diversification literature by investigating the diversification behaviors of complementors within a platform ecosystem. Drawing on resource based-theory and transaction cost economics, our theoretical framework suggests that the existing diversification measures inappropriately gather diversification breadth and depth under a single construct and treat related and unrelated diversification as if they are exogenous. Collecting and analyzing a unique Airbnb hospitality dataset, 2,969,737 listings by a total of 218,532 Airbnb hosts over 55 months, we provide performance implications of diversification breadth and depth by accounting for the “multi-faceted” nature of these constructs. Our findings on the relationship between diversification breadth and performance suggest that combined related and unrelated diversifiers are the highest performers based on financial metrics but lowest based on “evaluated performance.” We also find that pure related and pure unrelated diversifiers outperform single businesses based on financial metrics but underperform based on evaluated performance. Finally, we found an inverted-U shape relationship between diversification depth (related/unrelated expansion) and performance.
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