Abstract
In the Internet economy, digital platforms have become vital information and business infrastructure and reshaped the competition environment. Online-to-offline (O2O) platforms that link consumers’ online searches with offline consumption through purchases from local physical stores have become popular in the digital era. This paper studies the impact of a service firm’s decisions on product concentration on its performance in a platform-based local market. Informed by the infomediary role of digital platforms and the agglomeration theory, we theorize the roles of customer usage of digital platforms and spatial agglomeration in shaping the relationship between product concentration and firm performance. We look at data from China’s movie theater industry, in which the majority of movie theaters have joined O2O platforms, and we find that theaters’ movie concentrations have a significant positive impact on their revenues. The positive relationship is the weakest when customer usage of O2O platforms is medium and is comparatively stronger when the demand-side usage of O2O platforms is low or high. When spatial agglomeration is higher, the positive relationship is weaker. Theoretical and practical implications of the study are discussed.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Afuah, A. (2013). Are network effects really all about size? The role of structure and conduct. Strategic Management Journal, 34(3), 257–273. https://doi.org/10.1002/smj.2013
Aiken, L. S., West, S. G., & Reno, R. R. (1991). Multiple regression: Testing and interpreting interactions. Sage.
Baum, J. A. C., & Haveman, H. A. (1997). Love thy neighbor? Differentiation and agglomeration in the Manhattan hotel industry, 1898-1990. Administrative Science Quarterly, 42(2), 304–338. https://doi.org/10.2307/2393922
Baum, J. A. C., & Ingram, P. (1998). Survival-enhancing learning in the Manhattan hotel industry, 1898–1980. Management Science, 44(7), 996–1016. https://doi.org/10.1287/mnsc.44.7.996
Bhargava, H. K., & Choudhary, V. (2004). Economics of an information intermediary with aggregation benefits. Information Systems Research, 15(1), 22–36. https://doi.org/10.1287/isre.1040.0014
Brousseau, E., & Penard, T. (2007). The economics of digital business models: A framework for analyzing the economics of platforms. Review of Network Economics, 6(2), 81–114. https://doi.org/10.2202/1446-9022.1112
Brynjolfsson, E., Hu, Y., & Simester, D. (2011). Goodbye pareto principle, hello long tail: The effect of search costs on the concentration of product sales. Management Science, 57(8), 1373–1386. https://doi.org/10.1287/mnsc.1110.1371
Brynjolfsson, E., & Smith, M. D. (2000). Frictionless commerce? A comparison of Internet and conventional retailers. Management Science, 46(4), 563–585. https://doi.org/10.1287/mnsc.46.4.563.12061
Canina, L., Enz, C. A., & Harrison, J. (2005). Agglomeration effects and strategic orientations: Evidence from the US lodging industry. Academy of Management Journal, 48(4), 565–581. https://doi.org/10.2307/20159679
Chang, Y.-W., Hsu, P.-Y., & Yang, Q.-M. (2018). Integration of online and offline channels: A view of O2O commerce. Internet Research, 28(4), 926–945. https://doi.org/10.1108/IntR-01-2017-0023
Chen, J., Chen, J., Goh, K.-Y., Xu, Y., & Tan, B. C. Y. (2014). When do sellers bifurcate from Electronic Multisided Platforms? The effects of customer demand, competitive intensity, and service differentiation. Information & Management, 51(8), 972–983. https://doi.org/10.1016/j.im.2014.08.007
Chisholm, D. C., McMillan, M. S., & Norman, G. (2010). Product differentiation and film-programming choice: Do first-run movie theatres show the same films? Journal of Cultural Economics, 34(2), 131–145. https://doi.org/10.1007/s10824-010-9118-y
Chisholm, D. C., & Norman, G. (2012). Spatial competition and market share: An application to motion pictures. Journal of Cultural Economics, 36(3), 207–225. https://doi.org/10.1007/s10824-012-9168-4
Coelho, M. P., & Mendes, J. Z. (2019). Digital music and the “death of the long tail”. Journal of Business Research, 101, 454–460. https://doi.org/10.1016/j.jbusres.2019.01.015
Dai, H., Xiao, Q., Yan, N., Xu, X., & Tong, T. (2022). What influences online sales across different types of E-commerce platforms. International Journal of Electronic Commerce, 26(3), 311–330. https://doi.org/10.1080/10864415.2022.2076196
Díaz, A., Gómez, M., & Molina, A. (2017). A comparison of online and offline consumer behaviour: An empirical study on a cinema shopping context. Journal of Retailing and Consumer Services, 38, 44–50. https://doi.org/10.1016/j.jretconser.2017.05.003
Duan, W., Gu, B., & Whinston, A. (2009). Informational cascades and software adoption on the Internet: An empirical investigation. MIS Quarterly, 33(1), 23–48. https://doi.org/10.2307/20650277
Duan, W., Gu, B., & Whinston, A. B. (2008). Do online reviews matter? — An empirical investigation of panel data. Decision Support Systems, 45(4), 1007–1016. https://doi.org/10.1016/j.dss.2008.04.001
Eisenmann, T., Parker, G., & Van Alstyne, M. (2006). Strategies for two-sided markets. Harvard Business Review, 84(10), 92–101.
Eliashberg, J., Elberse, A., & Leenders, M. A. A. M. (2006). The motion picture industry: Critical issues in practice, current research, and new research directions. Marketing Science, 25(6), 638–661. https://doi.org/10.1287/mksc.1050.0177
Fan, L., Zhang, X., & Rai, L. (2021). When should star power and eWOM be responsible for the box office performance? - An empirical study based on signaling theory. Journal of Retailing and Consumer Services, 62, 102591. https://doi.org/10.1016/j.jretconser.2021.102591
Farronato, C., Fong, J., & Fradkin, A. (2020) Dog eat dog: Measuring network effects using a digital platform merger. National Bureau of Economic Research [working paper, No. w28047].
Fujita, M., & Thisse, J. (2002). Economics of agglomeration: Cities, industrial location, and regional Growth. Cambridge University Press.
Goff Inglis, K., & Zolfaghari, S. (2017). A review of scheduling problems and research opportunities in motion picture exhibition. Interfaces, 47(2), 175–187. https://doi.org/10.1287/inte.2016.0864
Granados, N., Gupta, A., & Kauffman, R. J. (2010). Research commentary—Information transparency in business-to-consumer markets: Concepts, framework, and research agenda. Information Systems Research, 21(2), 207–226. https://doi.org/10.1287/isre.1090.0249
Gregory, R. W., Henfridsson, O., Kaganer, E., & Kyriakou, H. (2021). The role of artificial intelligence and data network effects for creating user value. Academy of management review, 46(3), 534–551. https://doi.org/10.5465/amr.2019.0178
Hall, E. H., & John, C. H. S. (1994). A methodological note on diversity measurement. Strategic Management Journal, 15(2), 153–168. https://doi.org/10.1002/smj.4250150206
Hamilton, B. H., & Nickerson, J. A. (2003). Correcting for endogeneity in strategic management research. Strategic organization, 1(1), 51–78. https://doi.org/10.1177/1476127003001001
He, B., Gupta, V., & Mirchandani, P. (2021). Online selling through O2O platform or on your own? Strategic implications for local Brick-and-Mortar stores. Omega, 103, 102424. https://doi.org/10.1016/j.omega.2021.102424
Hinz, O., Eckert, J., & Skiera, B. (2014). Drivers of the long tail phenomenon: An empirical analysis. Journal of Management Information Systems, 27(4), 43–70. https://doi.org/10.2753/mis0742-1222270402
Kim, J. H., Newberry, P., Wagman, L., & Wolff, R. (2022). Local network effects in the adoption of a digital platform. The Journal of Industrial Economics, 70(3), 493–524. https://doi.org/10.1111/joie.12296
Kumar, A., Smith, M. D., & Telang, R. (2014). Information discovery and the long tail of motion picture content. MIS Quarterly, 38(4), 1057–1078.
Lee, P. T. Y., Feiyu, E., & Chau, M. (2022). Defining online to offline (O2O): A systematic approach to defining an emerging business model. Internet Research, 32(5), 1453–1495. https://doi.org/10.1108/intr-10-2020-0563
Li, H., Shen, Q., & Bart, Y. (2018). Local market characteristics and online-to-offline commerce: An empirical analysis of Groupon. Management Science, 64(4), 1860–1878. https://doi.org/10.1287/mnsc.2016.2666
Li, H., Fang, Y., Lim, K. H., & Wang, Y. (2019a). Platform-based function repertoire, reputation, and sales performance of E-marketplace sellers. MIS Quarterly, 43(1), 207–236. https://doi.org/10.25300/MISQ/2019/14201
Li, X., Li, Y., & Cao, W. (2019b). Cooperative advertising models in O2O supply chains. International Journal of Production Economics, 215, 144–152. https://doi.org/10.1016/j.ijpe.2017.09.018
Liu, Y. (2006). Word of mouth for movies: Its dynamics and impact on box office revenue. Journal of Marketing, 70(3), 74–89. https://doi.org/10.1509/jmkg.70.3.074
Liu, H., & Lu, J. (2016). Report on 2015 China’s film industry. Contemporary Cinema(China), 3, 25–31.
Liu, H., & Lu, J. (2020). Report on 2019 China’s film industry. Contemporary Cinema(China), 2, 15–26.
Lu, J., & Liu, H. (2019). China’s film industry report in 2018 Contemporary Film (China), 3, 13–20.
McCann, B. T., & Vroom, G. (2010). Pricing response to entry and agglomeration effects. Strategic Management Journal, 31(3), 284–305. https://doi.org/10.1002/smj.805
McKenzie, J. (2012). The economics of movies: A literature survey. Journal of Economic Surveys, 26(1), 42–70. https://doi.org/10.1111/j.1467-6419.2010.00626.x
Mejia, J., Gopal, A., & Trusov, M. (2020). Deal or no deal? Online deals, retailer heterogeneity, and brand evaluations in a competitive environment. Information Systems Research, 31(4), 1087–1106. https://doi.org/10.1287/isre.2020.0933
Morgan-Thomas, A., Dessart, L., & Veloutsou, C. (2020). Digital ecosystem and consumer engagement: A socio-technical perspective. Journal of Business Research, 121, 713–723. https://doi.org/10.1016/j.jbusres.2020.03.042
Pan, Y., & Wu, D. (2020). A novel recommendation model for online-to-offline service based on the customer network and service location. Journal of Management Information Systems, 37(2), 563–593. https://doi.org/10.1080/07421222.2020.1759927
Pan, Y., Wu, D., & Olson, D. L. (2017). Online to offline (O2O) service recommendation method based on multi-dimensional similarity measurement. Decision Support Systems, 103, 1–8. https://doi.org/10.1016/j.dss.2017.08.003
Roma, P., & Vasi, M. (2019). Diversification and performance in the mobile app market: The role of the platform ecosystem. Technological Forecasting and Social Change, 147, 123–139. https://doi.org/10.1016/j.techfore.2019.07.003
Song, P., Zheng, C., Zhang, C., & Yu, X. (2018). Data analytics and firm performance: An empirical study in an online B2C platform. Information & Management, 55(5), 633–642. https://doi.org/10.1016/j.im.2018.01.004
Taeuscher, K. (2019). Uncertainty kills the long tail: Demand concentration in peer-to-peer marketplaces. Electronic Markets, 29(4), 649–660. https://doi.org/10.1007/s12525-019-00339-w
Wan, X., Cenamor, J., Parker, G., & Van Alstyne, M. (2017). Unraveling platform strategies: A review from an organizational ambidexterity perspective. Sustainability, 9(5), 1–18. https://doi.org/10.3390/su9050734
Wan, X., & Chen, J. (2019). The relationship between platform choice and supplier’s efficiency-evidence from China’s online to offline (O2O) e-commerce platforms. Electronic Markets, 29(2), 153–166. https://doi.org/10.1007/s12525-017-0280-3
Wan, X., Chen, J., & Chen, B. (2020a). Exploring service positioning in platform-based markets. International Journal of Production Economics, 220, 1–11. https://doi.org/10.1016/j.ijpe.2019.07.028
Wan, X., Jha, A. K., Kazantsev, N., & Boh, W. F. (2023). Online-to-offline platforms: Examining the effects of demand-side usage on supply-side decisions. Information & Management, 60(2), 103757. https://doi.org/10.1016/j.im.2023.103757
Wan, X., Wang, N., & Liu, B.S.-C. (2020b). Impact of O2O platform multihoming and vertical integration on performance of local service firms – A quantile regression approach. Internet Research, 30(5), 1583–1610. https://doi.org/10.1108/intr-03-2019-0087
Webedia. (2019). From discovery to purchase: The moviegoing experience begins online (White paper). Retrieved from https://www.forbes.com/sites/scottmendelson/2019/03/11/more-moviegoers-buying-more-of-their-tickets-online-study-shows/. Accessed 12 July 2019.
Weidenfeld, A., Williams, A. M., & Butler, R. W. (2010). Knowledge transfer and innovation among attractions. Annals of tourism research, 37(3), 604–626. https://doi.org/10.1016/j.annals.2009.12.001
Xiao, L., Guo, Z., & D’Ambra, J. (2018). Benefit-based O2O commerce segmentation: A means-end chain approach. Electronic Commerce Research, 19(2), 409–449. https://doi.org/10.1007/s10660-017-9286-3
Xie, K., Wu, Y., Xiao, J., & Hu, Q. (2016). Value co-creation between firms and customers: The role of big data-based cooperative assets. Information & Management, 53(8), 1034–1048. https://doi.org/10.1016/j.im.2016.06.003
Xu, Y., Hazée, S., So, K. K. F., Li, K. D., & Malthouse, E. C. (2021). An evolutionary perspective on the dynamics of service platform ecosystems for the sharing economy. Journal of Business Research, 135, 127–136. https://doi.org/10.1016/j.jbusres.2021.05.056
Yang, Y., Gong, Y., Land, L. P. W., & Chesney, T. (2020). Understanding the effects of physical experience and information integration on consumer use of online to offline commerce. International Journal of Information Management, 51, 1–18. https://doi.org/10.1016/j.ijinfomgt.2019.102046
Zhou, J., & Wan, X. (2022). How to build network effects on online platforms for mental health. California Management Review, 64(4), 20–46. https://doi.org/10.1177/00081256221107421
Zhou, L., Wang, W., Xu, J., Liu, T., & Gu, J. (2018). Perceived information transparency in B2C e-commerce: An empirical investigation. Information & Management, 55(7), 912–927. https://doi.org/10.1016/j.im.2018.04.005
Zhu, F., & Zhang, X. (2010). Impact of online consumer reviews on sales: The moderating role of product and consumer characteristics. Journal of Marketing, 74(2), 133–148. https://doi.org/10.1509/jm.74.2
Zhu, K. (2002). Information transparency in electronic marketplaces: Why data transparency may hinder the adoption of B2B exchanges. Electronic Markets, 12(2), 92–99. https://doi.org/10.1080/10196780252844535
Acknowledgements
The authors appreciate all the helpful and insightful comments by anonymous reviewers. The first author gratefully acknowledges financial support from the Natural Sciences and Engineering Research Council of Canada (RGPIN-2022-03957). The second author gratefully acknowledges financial support from the National Social Science Foundation of China (Grant No. 21BGL033) and Principal Scholar/Excellent Team of Instructors of Qing Lan Project for University Scholars of Jiangsu Province, and Innovation Team Project “Internet Platform Strategy and Governance (KYCTD202201)” sponsored by Nanjing University of Finance and Economics.
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible Editor: Marianna Sigala
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Supplementary information
ESM 1
(DOCX 14 kb)
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Chen, J., Wan, X. & Yang, J. Superstar effects in a platform-based local market: The role of customer usage of online-to-offline platforms and spatial agglomeration. Electron Markets 33, 43 (2023). https://doi.org/10.1007/s12525-023-00661-4
Received:
Accepted:
Published:
DOI: https://doi.org/10.1007/s12525-023-00661-4
Keywords
- Product concentration
- Online-to-offline platforms
- Customer usage
- Movie theater industry
- Spatial agglomeration