EXPRESS: Platform Complementors’ Diversification Strategies and the Role of Venture Capital

Digital entrepreneurs play a critical role as complementors in platform ecosystems yet often face formidable power imbalances vis-à-vis platform owners and venture capitalists (VCs). To explore how entrepreneurs buffer against powerful platforms and enhance their own bargaining power, we conceptualize their diversification strategies as “escape routes”—across product categories (portfolio diversity) and across platforms (multihoming)—through the lens of native platform choice and VC funding. We propose three distinctive models of complementors’ diversification choices that arise when the VC’s interests align with those of the complementor, platform or neither, illustrating the triadic platform-complementor-VC dynamics. Using data on iOS and Android app developers, and their VC funding status, we find that originating on Apple’s iOS platform correlates with relatively narrow portfolio breadth but a stronger tendency to serve multiple platforms. Conversely, originating on Google’s Android platform is associated with greater portfolio diversity yet a lower propensity for cross-platform expansion. Interestingly, neither VC funding nor native platform choice alone fully predict all diversification choices; rather, the additive effects of these factors reveal the “escape routes” or “all-in” focused approaches. Notably, regardless of the native platform, developers securing VC funding appear to specialize, suggesting a ‘VC standalone’ model, whereby independent of the platform power dynamics, external capital may prefer strategic depth over breadth. Our conceptual model and findings highlight how powerful platforms and scarce venture capital shape entrepreneurial choices, offering new insights into how these stakeholders’ interests may converge or diverge in collective enterprises such as platform ecosystems.