Publications
Santamaria, S., Abolfathi, N., & Mahmood, I. P. (2023). Demand pull versus Resource push Approaches to Entrepreneurship: A Field Experiment. Strategic Management Journal. 1–24.
We compare the efficacy of two broad approaches to entrepreneurship training: a training prioritizing demand-side activities versus a training prioritizing resource-side activities. We do so by running a field experiment inside a 6-month entrepreneurship program involving 236 early-stage entrepreneurs. Inspired by our training, the first group invested more time interacting with potential customers and developing a deep understanding of customer needs and problems. The other group, in contrast, spent more time identifying and exploiting their core resources such as their network. Our results reveal that the training prioritizing demand-side activities is substantially more effective. At the end of the program, the group exposed to the demand-side training acquired more than twice the number of customers and generated revenues 65% higher than the other group.
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Best Paper Award, wISE Scholarship in Oceania (Co-organized by Strategic Management Division of AOM), 2023
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SMJ Version (open access)
Abolfathi, N., Fosfuri, A., & Santamaria, S. (2022).
Out of the Trap: Conversion Funnel Business Model, Customer Switching Costs, and Industry Profitability. Strategic Management Journal, 43(9), 1872–1896.
Across many industries, firms employ a conversion funnel business model to attract customers with basic and affordable products, generate lock-in, and then sell them more advanced and expensive products. We argue that this business model, coupled with high customer switching costs, results in a market outcome characterized by aggressive pricing and reduced profits. A sudden reduction in customer switching costs disrupts the conversion funnel and can eventually increase industrywide prices and profitability, an outcome that contradicts conventional wisdom in strategy research. We develop a stylized model to formalize our ideas and provide supportive evidence using a difference-in-differences methodology with staggered treatment for a large, global sample of mobile telecommunications operators.
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Best Paper Prize Honorable Mention, SMS Conference 2021
Abolfathi, N., Santamaria, S., & Williams, C. (2021).
How Does Firm Scope Depend on Customer Switching Costs? Evidence from Mobile Telecommunications Markets. Management Science. 68(1): 316–332.
This paper examines the relative advantages of single-product and multiproduct firms following changes in customer switching costs. Whereas a single-product firm can closely tailor offerings to customers’ needs, a multiproduct firm can create value for customers in the form of flexibility, allowing them to change between product varieties as preferences evolve without needing to switch providers. We argue that this value-creation mechanism is more effective when customers face high switching costs and explore this prediction in the mobile telecommunications sector, using an exogenous policy change (mobile number portability) that suddenly decreases customer switching costs. Our results reveal that when customer switching costs fall, multiproduct firms see lower growth than single-product firms, and entry with a multiproduct offering becomes less frequent than before. The study highlights how customer switching costs can enable or inhibit choices of firm scope.
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Glueck Best Paper Award, Strategic Management Division, AOM Annual Conference 2020
Abolfathi, N., & Santamaria, S. (2020).
Dating Disruption-How Tinder Gamified an Industry.
MIT Sloan Management Review, 61(3), 7-11.
An analysis of the U.S. mobile dating app industry from its inception in 2007 to its phenomenal shakeout in 2013 demonstrates that Tinder changed the game — quite literally. As in other cases of industry disruption, dating app upheaval illustrates that newcomers need to compete by transforming noncustomers into customers rather than challenging incumbents for the established mainstream market. Although emerging technologies may allow newcomers the opportunity to overthrow incumbent competitors, our research shows that altering the user experience for an overlooked market segment, not technology, is the key success driver for industry disruption.
Selected Working Papers
A Demand-side Perspective on Firm Performance after New Technology Introduction: The Role of Customer Complementary Assets. (with Phene, A.)
Firms may fail to grow their customer base and enhance performance after new technology introduction due to customers’ lower value perception of the new technology. Integrating research on firm complementary assets with the demand-side literature, we propose that customers’ prior access to complementary assets allows firms to benefit after new technology introduction. We posit that a firm can increase customer value perceptions and achieve better performance by leveraging pre-existing intangible and tangible complementary assets owned by its customers that arise from their familiarity with similar technologies and access to supporting equipment, respectively. We test our ideas by considering the introduction of 4G technology in the telecommunications industry. Our findings highlight that firms need to proactively equip their customers with complementary assets well ahead of new technology introduction.
Platform Competition and Complementors Scope: A Study of Gaming Streaming Platforms.
In this paper, I develop a framework to explain the relative performance of nascent entrepreneurs that create complements for platforms (complementors), depending on the scope of their activities. I propose multihoming complementors outperform their specialized counterparts when competition among platforms is relatively low. When platform competition substantially increases, the user base of multihoming complementors drops in comparison to specialized ones. This is because specialized complementors have a stronger incentive to invest in quality when their platform is challenged by a rival platform. I test my predictions using a large, hand-collected dataset of YouTube video game streaming channels. Specifically, I examine the performance of YouTube multihoming complementors following an external shock, the introduction of Twitch Prime, which enhanced the visibility of YouTube’s rival, Twitch, increasing the competition between the two platforms.
Niche Expansion Strategy: Explaining Leadership Change in the Mobile Dating App Industry.
We provide a theoretical framework highlighting when new platforms are able to displace incumbent platforms and become market leaders by identifying and expanding seemingly small niches. The framework is based on the idea that markets are composed of different niches (or segments) with heterogeneous intensity of network effects. Thus, selecting and targeting a niche with the strongest network effects can trump the dominant strategy suggested by extant literature –i.e., maximizing the number of users irrespective of their segments. For the empirical analysis, we build on a unique dataset of U.S. dating applications, where a new wave of entrants into the oligopolistic industry experienced enormous success, replacing incumbent platforms in a short window of time. We document how the success of the new entrants is explained by their focus on an overlooked niche, young adults, with a stronger network effect than the other segments.