Antitrust Intervention in Platform Ecosystems and Implications for Complementor Firms

Building on research on competition and innovation, we show that weakening a dominant platform through antitrust intervention can drive increases in complementors’ innovation yet also dampens their profits. Using data on enterprise infrastructure software from 1998 to 2004 and a difference-in-differences design, we examine the relation between the U.S. antitrust intervention against Microsoft (dominant platform) and subsequent innovation and profitability by infrastructure applications firms (complementors). The data show that innovation—particularly of low power complementors—is increased when the dominant platform is restrained. However, profitability is reduced. Our results contribute to understanding links between competition and innovation in platform ecosystems, and the opportunities and threats related to dominant platforms that often occupy privileged positions in digital ecosystems.