Offense or Defense? Digital Innovation Strategy to Face Competitive Position Shifting in Mobile App Platform

Changes in competitive positions within digital platforms, such as transitioning from a challenger to a leader, are common occurrences. However, how achieved competitive positions can be sustained is a critical yet understudied issue. To address this gap, this study examines the effects of competitive position shift on development strategy change in the context of digital innovation. Using data collected from the Apple App Store for over six months and a PSM-DID design, our study reveals that the likelihood of incremental innovation decreases when a challenger's competitive position rises to a “gradual catch-up” stage, and the probability of radical innovation reduces in the “forging ahead” stage. Additionally, a drop in the competitive position to a “falling behind” stage decreases the possibility of radical innovation. Our study contributes to the literature on competitive dynamics and platform innovation and provides practical guidance to mobile app developers.