Research

Research on Disintermediation

Technology and Disintermediation in Online Marketplaces 

(Management Science, forthcoming)

Abstract: With the development of communication technology that makes online transactions easier, there is also an increased risk of disintermediation—sellers and buyers circumventing a platform to transact directly—in online two-sided marketplaces. Such disintermediation may lead to significant revenue loss for online platforms. However, it remains unclear how the characteristics of platforms affect their vulnerability to disintermediation. Using the blockade of Skype in mainland China as a natural experiment, this study examines how online communication technologies affect disintermediation and transaction outcomes in a large US online freelance marketplace. The results show that restricting this alternative communication technology, which platforms struggle to monitor, reduces disintermediation by around 18%. This effect is potentially due to economic frictions in transactions, as the reduction in disintermediation is greater for high-transaction-cost jobs, such as time-sensitive jobs, communication-intensive jobs, and high-skilled jobs, as well as for cost-sensitive users, such as experienced users and personal users as opposed to enterprise users. With these results, platforms can reduce disintermediation risks when making investment and market entry decisions.

Recipient, 2017-2019 Strategy Research Foundation (SRF) Dissertation Scholar Award

Trust and Disintermediation: Evidence from an Online Freelance Marketplace    

(Joint with Feng Zhu; Management Science, 67(2): 794–807)

Abstract: As a platform improves trust between the two sides of its market to facilitate matching and transactions, it faces an increased risk of disintermediation: with sufficient trust, the two sides may circumvent the platform to avoid the platform’s fees. In this paper, we investigate the relationship between increased trust and disintermediation by leveraging a randomized control trial in an online freelance marketplace. We find that enhanced trust increases the likelihood of high-quality freelancers being hired. However, when the trust level is sufficiently high, it also increases disintermediation, which offsets the revenue gains from the increase in hiring high-quality freelancers. We also identify heterogeneity across clients and freelancers in their tendencies to disintermediate. We discuss strategies that platforms can use to mitigate the tension between trust building and disintermediation. 

Management Science IS Best Paper Award, 2023. Winner 

Best PhD Paper Award, 2017 Strategic Management Society (SMS) Annual Meeting, Winner

Best Student Paper Award (TIM), 2018 Academy of Management (AOM) Annual Meeting, RunnerUp

Best Paper Award, 2017 International Conference on Information System (ICIS) Workshop on E-Business, Runner-up

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

(Joint with Xia Han and Gaoyang Cai; Under revision)

Abstract: 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.

Best Proposal Award for Rigor, 2023 Strategic Management Society (SMS) Competitive Strategy IG, Finalist

Best Paper Award, 2023 INFORMS Annual Meeting E-Business Cluster, Winner

Research on Inefficient Intermediation

Ideology and Composition among an Online Crowd: Evidence from Wikipedians 

(Joint with Shane Greenstein and Feng Zhu; Management Science, 67(5): 3067-3086)

Abstract: Online communities bring together participants from diverse backgrounds and often face challenges in aggregating their opinions. We infer lessons from the experience of individual contributors to Wikipedia articles about U.S. politics. We identify two factors that cause a tendency toward moderation in collective opinion: Either biased contributors contribute less, which shifts the composition of participants, or biased contributors moderate their own views. Our findings show that shifts in the composition of participants account for 80%–90% of the moderation in content. Contributors tend to contribute to articles with slants that are opposite their own views. Evidence suggests that encountering extreme contributors with an opposite slant plays an important role in triggering the composition shift and changing views. These findings suggest that collective intelligence becomes more trustworthy when mechanisms encourage confrontation between distinct viewpoints. They also suggest, cautiously, that managers who aspire to produce content “from all sides” should let the most biased contributors leave the collective conversation if they can be replaced with more moderate voices. 

Media: Washington Post; HBS Working Knowledge; Skeptical Science

Technology Fragmentation, Platform Investment, and Complementary Innovation 

(Joint with Zhuoxin Allen Li; Under revision)

Abstract: Complementor innovation is an essential form of value co-creation in open platform ecosystems. However, the increasing technology fragmentation, i.e., users in the ecosystem adopting different versions of the platform technologies, has significantly hindered complementor innovation. Platform's investment to fight fragmentation may have unclear effects on complementor innovation since reducing platform fragmentation is a complex coordination problem involving several parties in the ecosystem. Focusing on the recent efforts by Google to address Android fragmentation, and based on both cross-platform and within platform analyses, we find that app developers do respond to the platform's commitment in fighting fragmentation and significantly increase their innovation efforts in updating apps shortly after the platform's investment, despite that the fragmentation reduction takes a longer time to materialize in the platform infrastructure. We then test for the complementor’s forward-looking behavior and find strong evidence. Such forward-looking behavior is likely driven by developers’ anticipation of lowered innovation cost and higher perceived platform value in future. Our research highlights the role of platform commitment to improve platform infrastructure in complementor innovation and provides implications for platform investment and intervention.