Platform-based Disruption: The Dual Effect of Digital Platforms on Incumbent Firms

Tim Meyer, Carmelo Cennamo, Erdem Dogukan Yilmaz

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

We expand the perspective on disruption by studying how digital platforms can affect the competitiveness of incumbents by complementing their core product offerings and slowly substituting their complementary assets. Platforms provide a new technological architecture for aggregating and linking various product offerings from multiple providers and connecting them to customers. We distinguish between peer-to-peer platforms introducing alternative services for incumbents’ core services (e.g., Airbnb) and platform marketplaces introducing a new type of complementary asset into the focal market (e.g., Booking.com). We argue that as supply on peer-to-peer platforms increases, incumbents in the focal market respond by increasingly using platform marketplaces. As this market shift unfolds, platforms have the dual effect of complementing incumbents’ core activities but disrupting incumbents by eroding the value of their specialized downstream complementary assets and increasingly commoditizing their core offerings. Using data from the hotel industry in the state of Texas, we find supporting evidence of this process showing that it is high-end hotel chains (rather than those competing more directly with Airbnb-based services) that are affected the most by an increase of Airbnb services in a city. We thus offer a new perspective on how digital platforms can disrupt established incumbents not through substitution of their core offerings but by complementing them and at the same time reducing the level of complementarity of their existing complementarity assets, which ultimately unsettles their positional advantage.
Original languageEnglish
Publication date2021
Number of pages37
Publication statusPublished - 2021
EventDRUID21 Conference - Copenhagen Business School, Frederiksberg, Denmark
Duration: 18 Oct 202120 Oct 2021
Conference number: 42
https://conference.druid.dk/Druid/?confId=62

Conference

ConferenceDRUID21 Conference
Number42
LocationCopenhagen Business School
CountryDenmark
CityFrederiksberg
Period18/10/202120/10/2021
Internet address

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