This study investigates how the governance policy of disintermediation, i.e., restricting communication channels through which complementors can persuade buyers to circumvent the platform and transact directly, affects complementors’ innovation behavior. Leveraging a governance policy change on Amazon.com (the focal platform) that prohibits external website links during buyer-seller communications, based on a coarsened exact matching (CEM) and a difference-in-differences (DID) approach, we find that complementors (i.e., sellers) significantly reduce their number of new products launched on the focal platform after the policy change. Such an effect is mitigated by complementor reputation and strengthened by the capacity constraint. Supplemental analyses of the mechanisms show that the affected complementors significantly reduce the total number of new product developments, i.e., the income effect, and increase the number of new products launched off the focal platform after the policy change, i.e., the switching effect. Moreover, complementors tend to strategically switch the high-end products away while leaving low-end products on the focal platform, i.e., the bait effect. Our results provide implications for platform governance policies against disintermediation and its impact on complementor product innovation both on and off the platform.

Han, Xia, Cai, Gaoyang, and Gu, Grace, Disintermediation Governance and Complementor Innovation: An Empirical Look at Amazon.com. 2023. Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4429792.