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And the Winner Is …? The Desirable and Undesirable Effects of Platform Awards

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Abstract

We study platform firms’ decision to recognize innovation by complementors ex post through awards. Despite being purely symbolic, awards might set incentives for complementors’ product strategies that can eventually lead to both desirable and undesirable outcomes for the platform firm. We depart from signaling theory and derive hypotheses on the effects of awards on complementors’ product strategies. To test them, we implement a quasi-experiment in the context of the Google Android mobile platform and the prestigious Google Play Award. We infer the effect of the award by estimating the difference-in-differences between award winners and runners-up, before and after the conferral. The main sample encompasses 125 award nominees and their 793 apps between 2016 and 2018. We report three findings. First, the award encourages recipients to focus on releasing complement improvements rather than new complements. Second, the award increases recipients’ likelihood of multihoming. Finally, the award increases new complement releases in the recipients’ market niche by attracting other complementors. We contribute to the platform governance literature by informing about the effects of awards. Additionally, our findings have theoretical implications for understanding “soft” platform governance mechanisms.

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While the growth of the mobile apps market has created significant market opportunities and economic incentives for mobile app developers to innovate, it has also inevitably invited other developers to create rip-offs. Practitioners and developers of original apps claim that copycats steal the original app's idea and potential demand, and have called for app platforms to take action against such copycats. Surprisingly, however, there has been little rigorous research analyzing whether and how copycats affect an original app's demand. The primary deterrent to such research is the lack of an objective way to identify whether an app is a copycat or an original. Using a combination of machine learning techniques such as natural language processing, latent semantic analysis, network-based clustering, and image analysis, we propose a method to identify apps as original or copycat and detect two types of copycats: deceptive and nondeceptive. Based on the detection results, we conduct an econometric analysis to determine the impact of copycat apps on the demand for the original apps on a sample of 10,100 action game apps by 5,141 developers that were released in the iOS App Store over five years. Our results indicate that the effect of a specific copycat on an original app's demand is determined by the quality and level of deceptiveness of the copycat. High-quality nondeceptive copycats negatively affect demand for the originals. By contrast, low-quality, deceptive copycats positively affect demand for the originals. Results indicate that in aggregate the impact of copycats on the demand of original mobile apps is statistically insignificant. Our study contributes to the growing literature on mobile app consumption by presenting a method to identify copycats and providing evidence of the impact of copycats on an original app's demand.
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In hopes of motivating consumers to provide larger volumes of useful reviews, many retailers offer financial incentives. Here, we explore an alternative approach, social norms. We inform individuals about the volume of reviews authored by peers. We test the effectiveness of using financial incentives, social norms, and a combination of both strategies in motivating consumers. In two randomized experiments, one in the field conducted in partnership with a large online clothing retailer based in China and a second on Amazon Mechanical Turk, we compare the effectiveness of each strategy in stimulating online reviews in larger numbers and of greater length. We find that financial incentives are more effective at inducing larger volumes of reviews, but the reviews that result are not particularly lengthy, whereas social norms have a greater effect on the length of reviews. Importantly, we show that the combination of financial incentives and social norms yields the greatest overall benefit by motivating reviews in greater numbers and of greater length. We further assess treatment-induced self-selection and sentiment bias by triangulating the experimental results with findings from an observational study. The online appendix is available at https://doi.org/10.1287/mnsc.2016.2715. This paper was accepted by Chris Forman, information systems.
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This paper uses data from an attendance award program implemented at one of five industrial laundry plants to show the complex costs of corporate awards previously ignored in the literature. We show that although the attendance award had direct, positive effects on employees who previously had punctuality problems, it also led to strategic gaming behavior centered on the specific eligibility criteria for the award. The award program temporarily changed behavior in award-eligible workers but did not habituate improved attendance. Furthermore, we show that the extrinsic reward from the award program crowded out the internal motivation of those employees who had previously demonstrated excellent attendance, generating worse punctuality during periods of ineligibility. Most novelly, we show that the attendance award program also crowded out internal motivation and performance in tasks not included in the award program. Workers with above average pre-program attendance lost 8% efficiency in daily laundry tasks after the program's introduction. We argue that these motivational spillovers result from the perceived inequity of internally motivated workers' previously unrewarded superior attendance contributions. Our paper suggests that even purely symbolic awards can generate gaming and crowding out costs that may spill over to other important tasks.
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We discuss a method for improving causal inferences called ‘‘Coarsened Exact Matching’’ (CEM), and the new ‘‘Monotonic Imbalance Bounding’’ (MIB) class of matching methods from which CEM is derived. We summarize what is known about CEM and MIB, derive and illustrate several new desirable statistical properties of CEM, and then propose a variety of useful extensions. We show that CEM possesses a wide range of statistical properties not available in most other matching methods but is at the same time exceptionally easy to comprehend and use. We focus on the connection between theoretical properties and practical applications. We also make available easy-to-use open source software for R, Stata, and SPSS that implement all our suggestions.
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The literature on product development continues to grow. This research is varied and vibrant, yet large and fragmented. In this article we first organize the burgeoning product-development literature into three streams of research: product development as rational plan, communication web, and disciplined problem solving. Second, we synthesize research findings into a model of factors affecting the success of product development. This model highlights the distinction between process performance and product effectiveness and the importance of agents, including team members, project leaders, senior management, customers, and suppliers, whose behavior affects these outcomes. Third, we indicate potential paths for future research based on the concepts and links that are missing or not well defined in the model.
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Awards are a widespread phenomenon. They cater to the fundamental desire for social recognition and serve as a valuable incentive to influence behaviour. The study of awards such as medals, prizes and titles has in recent years gained momentum in economics, complementing the longstanding focus on material incentives. To evaluate the effectiveness of awards as a motivator is difficult as the effect of awards must be separated from the fact that awards are meant to be given to the best. We show how research on awards has advanced over the last couple of years, thus providing points of departure for future work.
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Awards are a valuable strategic resource. Motivation theory and the emerging body of empirical literature suggest that awards can have a significant effect on employee motivation and corporate performance, though not always in the intended direction. Awards can also destroy value. The organizational award literature has so far largely neglected this important issue. We develop a synthesis of the dimensions critical for successful award bestowals and analyze under which conditions awards generate firm-specific value that is sustained and difficult for competitors to imitate. The process of value creation and capture is contingent on the given firm's organizational characteristics and nature of production. The paper concludes by laying out empirical implications. JEL codes: M52, M54, J24, J30. Awards are widely used in the corporate sector. They fundamentally differ from monetary incentives, which risk crowding out employees' intrinsic motivation. Among the variety of awards, two general types can be distinguished: confirmatory awards based on explicit, pre-determined performance criteria, and discretionary awards, which rely on broad performance evaluations and may be used ex post to honor outstanding performance. Appropriately designed and adjusted to the specific firm's characteristics, awards enhance employees' motivation and corporate performance. They express recognition and support their recipients' perceived competence and social status. Awards help to retain valuable employees and to establish role models. However, awards may also backfire, for instance when they provoke envy among coworkers. We propose when awards risk destroying value, and when they are particularly valuable.
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Intraplatform competition has received scant attention in prior studies, which predominantly study interplatform competition. We develop a middle-range theory of how complementarity between input control and a platform extension's modularization-by inducing evolution-influences its performance in a platform market. Primary and archival data spanning five years from 342 Firefox extensions show that such complementarity fosters performance by accelerating an extension's perpetual evolution.
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Prior research documents the significance of using platform boundary resources (e.g. application programming interfaces) for cultivating platform ecosystems through third‐party development. However, there are few, if any, theoretical accounts of this relationship. To this end, this paper proposes a theoretical model that centres on two drivers behind boundary resources design and use – resourcing and securing – and how these drivers interact in third‐party development. We apply the model to a detailed case study of Apple's iPhone platform. Our application of the model not only serves as an illustration of its plausibility but also generates insights about the conflicting goals of third‐party development: the maintenance of platform control and the transfer of design capability to third‐party developers. We generate four specialised constructs for understanding the actions taken by stakeholders in third‐party development: self‐resourcing, regulation‐based securing, diversity resourcing and sovereignty securing. Our research extends and complements existing platform literature and contributes new knowledge about an alternative form of system development.
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In the presence of network externalities, complementary related diversification strategies in production and consumption sides could be critical for achieving positive returns to within-industry diversification. This study develops this idea and tests it in a longitudinal study of 884 firms in the software industry. Related diversification across operating system platforms and related diversification across software product markets complement each other and mutually affect each other's marginal returns. Implementing the two strategies in combination improves sales growth and market share. Implementing only market related diversification reduces sales growth. Implementing only platform related diversification reduces both sales growth and market share.
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We examine the importance of indirect network effects in the U.S. video game market between 1994 and 2002. The diffusion of game systems is analyzed by the interaction between console adoption decisions and software supply decisions. Estimation results suggest that introductory pricing is an effective practice at the beginning of the product cycle, and expanding software variety becomes more effective later. We also find a degree of inertia in the software market that does not exist in the hardware market. This observation implies that software providers continue to exploit the installed base of hardware users after hardware demand has slowed.
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We show how award ceremony rituals influence organizational field evolution through four critical processes: distributing prestige in "situated" performances; en- acting a highly charged ceremonial form designed to attract the collective attention of a field; serving as a medium for surfacing and resolving conflicts about the legitimacy of field participants; and tightening horizontal linkages within the field. Using the Grammy Awards as a case study, we present a mixed-method, longitudinal analysis of these processes operating in tandem. In this article, we use perspectives from ritual theory to show how award ceremonies are an im- portant institutional mechanism for shaping organ- izational fields. The idea of field is central to insti- tutional theory. Because institutional theorists are concerned with the seepage of social context into organizations (Meyer & Rowan, 1977), field serves as a cogent location in which to situate the inter- play of institutional and organizational forces. Con- ceptually, field is broader than industry, which usually refers to a set of equivalent firms that pro- duce a similar product or service (Kenis & Knoke, 2002).1 DiMaggio and Powell defined a field as "those organizations that, in the aggregate, consti- tute a recognized area of institutional life: key sup- pliers, resource and product consumers, regulatory agencies, and other organizations that produce sim- ilar service or products" (1983: 148). One of the more intriguing and unresolved puzzles in institu-
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Science and technology advances drive firms to continually enhance their product’s performance and launch sequentially improving offerings. Firms face challenges in marketing such improving products to well informed, forward-looking consumers who anticipate product improvements and seek to delay their purchase timing. Product design, specifically a modular upgradable architecture in which improving and stable subsystems of a product are separated and selectively upgraded, can be a valuable approach for marketers to alleviate consumer concerns about product obsolescence. However, such an architecture-based approach can present new challenges as well, dealing with which requires carefully coordinated cross-functional decision making by the firm. In this paper, we identify and formalize the notion of design inconsistency, which refers to the monopolist firm’s inability to commit to future product design architectures. We find that firms experience design inconsistency even when they are able to commit to future prices, and design inconsistency lowers firm profits as well as consumer surplus. We then derive a joint product architecture and pricing approach to solve this problem; this enables an innovating firm to optimally and in a time consistent manner launch modular upgradable products. The modeling and analysis in the paper lends insight into types of markets and products for which modular upgradability is most appropriate, and offers guidelines on making pricing and product design decisions jointly for managing sequential innovation.
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This paper empirically investigates the impact of winning a quality award on the market value of firms by estimating the mean "abnormal" change in the stock prices of a sample of firms on the date when information about winning a quality award was publicly announced. We note that the abnormal returns generated by the quality award winning announcements provide a lower bound for the impact of implementing an effective quality award improvement program. Our results show that the stock market reacts positively to quality award announcements. Statistically significant mean abnormal returns on the day of the announcements ranged from a low of 0.59% to a high of 0.67% depending on the model used to generate the abnormal returns. The reaction was particularly strong for smaller firms (mean abnormal returns ranged from low of 1.16% to a high of 1.26%), and for firms that won awards from independent organizations such as Malcolm Baldrige, Philip Crosby, etc. (mean abnormal returns ranged from a low of 1.31% to a high of 1.65%). Winning a quality award also conveys information about the systematic risk of the firm. We find a statistically significant decrease in the equity and the asset betas after the quality award announcement. There is also evidence to suggest that large firms experience negative stock price performance in the second year before winning quality awards, which is followed by a year of positive performance. Small firms experience a positive stock price performance in the second year before winning quality awards but no negative performance before winning quality awards.