Disintermediation Governance and Complementor Innovation: An Empirical Look at Amazon.com

This study investigates how the platform’s disintermediation governance policy (i.e., the policy that disciplines complementors and consumers circumventing the platform to transact directly) affects complementors’ product innovation and launching strategies. We leverage a change in the Communication Guideline on Amazon.com (i.e., the focal platform), which prohibits complementors (i.e., sellers) from sending external website links, telephone numbers, and email addresses to buyers in direct messaging, as a policy shock to Amazon complementors. By conducting a difference-in-differences analysis, we find that the governance policy significantly reduces product innovation on the focal platform among complementors with direct selling channels as measured by the number of new products and the innovativeness of new products. These main effects are mitigated by complementor reputation on Amazon and complementor multihoming. Mechanism analyses show that complementors with direct selling channels increase the number of new products launched through those channels after the policy change (i.e., the switching effect). Moreover, complementors tend to strategically switch innovative and high-value products away from the focal platform while leaving less innovative but price-competitive products on it to attract Amazon consumers before diverting to their direct selling channels (i.e., the bait effect). Our results have implications for platform governance policies regarding disintermediation and its impact on complementor product innovation and launch strategies both on and off the focal platform. This paper was accepted by D. J. Wu, information systems. Funding: G. Gu gratefully acknowledges research support from the USC Marshall School of Business. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.04439 .