![]() Using data from, we analyze the patterns of Amazon's entry into its third-party sellers' product spaces. Prior studies have offered two possible explanations for such entries: platform owners may target the most successful complementors so as to appropriate value from their innovations, or they may target poor performing complementors to improve the platforms' overall quality. Platform owners sometimes enter complementors' product spaces to compete against them directly. We also investigate how factors such as exclusive content and hardware-only adopters affect compatibility incentives. We further show that social welfare is greater under one-way compatibility than under incompatibility. One-way compatibility can thus increase asymmetry between the platform owners’ profit foci and, given a sufficiently large difference in the standalone utilities, yields greater profits for both platform owners. As the difference in the standalone utilities increases, royalties from content sales become less important to the platform owner with greater standalone value, but more important to the other platform owner. We find that incentives to establish one-way compatibility-the platform owner with smaller standalone value grants access to its proprietary content application to users of the competing platform-can arise from the difference in their profit foci. We consider a game-theoretic model in which two platforms offer different standalone utilities to users. ![]() We study compatibility decisions of two competing platform owners that generate profits through both hardware sales and royalties from content sales. ![]() Professor Zhu is the first faculty who grew up in China to have been promoted to full professor with tenure in the history of Harvard Business School. He did his undergraduate work in computer science, economics, and mathematics at Williams College. in science, technology and management and a master’s in computer science at Harvard University. ![]() He serves as an advisor to several startup firms. His research has also been relied upon by antitrust regulators in several countries. Professor Zhu has conducted seminars and provided consulting services to many companies including Alibaba, ByteDance, Facebook, Microsoft, Uber, Abbott, China Construction Bank, Procter & Gamble, Atos, and Ernst & Young. He has also taught many courses in Harvard Business School’s executive, doctoral and online programs. His research and teaching have won many international awards, such as the Inaugural Practical Impacts Award from the Institute for Operations Research and the Management Sciences (INFORMS) Information Systems Society, which honors distinguished information systems academics who have demonstrated outstanding leadership and sustained impact on the industry.Ĭurrently, Professor Zhu serves as the coursehead for the Technology and Operations Management course in the MBA required curriculum. It has been covered by such media as the Washington Post, the Financial Times, the New York Times, and the Wall Street Journal. Professor Zhu's research has appeared in leading academic journals including the American Economic Review, Management Science, Marketing Science, Organization Science, Strategic Management Journal, and Information Systems Research. He is an expert on platform strategy, digital transformation and innovation. Feng Zhu is Professor of Business Administration at the Harvard Business School.
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