Platform Diversification and Cross-Platform Cannibalization
How will a platform firm’s diversification affect its existing business? We argue that, while it enables complementors to share some of their resources across businesses, it may also create opportunities for complementors to reallocate other complementary resources to maximize utilization, thereby hurting the platform firm’s existing business. In addition, it may divert complementors away from competing platform firms. Such sharing-enabled resource reallocation may be due to exclusivity in the use of complementor resources at the transaction level and the lack of control by platform firms over them at the organizational level. We analyze changes in the rideshare business in Manhattan after Uber launched Uber Eats in New York City. Using a continuous difference-in-differences model, we find that the launch of Uber Eats was associated with a reduction in trip volumes for both Uber and Lyft. However, both effects were weakened during rush hours, when the opportunity costs of resource reallocation to Uber Eats were higher for the rideshare drivers.
platform, diversification, resources, complementor, exclusivity