“Competition and Contractual Choice in a Two-sided Market: Evidence from an Online Novel Writing Platform” by Dr. Yanhui Wu
STRATEGY AND IB SEMINAR
Dr. Yanhui Wu
Assistant Professor of Finance and Business Economics
Marshall School of Business
University of Southern California
This paper studies how competition affects the contractual choice of entrepreneurial projects in a Chinese online novel writing platform. Exploiting a policy shock that spurred the entry of romance/urban novels but not other types, we find that competition (1) leads authors to sell book ownership to, rather than sharing ownership with, the platform and (2) increases the market performance of the ownership-selling books compared to the ownership-sharing books. These effects are considerably smaller for more-able authors. The findings are consistent with an incomplete-contract theory of the firm in which competition increases the value of relationshipspecific investments made by the platform.