Competition or spillover? Effects of platform-owner entry on provider commitment

Platform owners occasionally enter third-party providers’ markets with similar offerings. This study investigates the influence of such platform-owner entry on third parties’ commitment to a platform. We posit two competing mechanisms that explain the impact of platform-owner entry: the competition and spillover mechanisms. The competition mechanism suggests that a platform owner’s entry dampens third-party providers’ commitment, primarily due to intensified competition, while the spillover mechanism predicts the opposite effect because of increased consumer awareness. Furthermore, we contend that under high (low) platform support, the mediating role of the spillover (competition) effect is strengthened. To test these propositions, we conducted a survey and collected data from platform providers in multiple industries. Overall, our findings support our hypotheses, which suggest that platform-owner entry is a double-edge sword. The entry may crowd out third-party providers, but it can also be a win-win for a platform and providers in the context of high platform support.