Investigating Developers' entry to Mobile App Platforms: a Network Externality View

As an exploratory study, this paper examines the factors that influence new developers’ entry to the mobile app industry, focusing on indirect network externality (INE) between hardware and software sides as well as direct network externality (DNE) between potential entrants and existing developers. Specifically, we hypothesize that INE encourages new developers’ entry whereas DNE changes with the growth of mobile platforms. To test our hypotheses, we gathered comprehensive data on mobile apps, developer-related factors from the four platforms (Apple iOS, Google Android, BlackBerry and Windows Phone) and user base of each platform. Our econometric analyses based on platform-pooled and platform-separated models reveal interesting patterns about developers’ entry decisions. An inverted U-shaped DNE between existing developers and new entrants is found. For INE, our results show that new developers are more likely to enter a platform with a larger user base. Given a platform, the entry timing is affected by the characteristics of the platform. The impacts of incumbents and price level are also discussed.

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