User Data, Market Power and Innovation in Online Markets: Evidence from the Mobile App Industry∗

We study how developers’ access to user data mediates the relationship between market power and product innovation in the mobile app industry. Developers with market power might more easily access user data through active data collection, which might imply less user privacy. Better access to user data might then facilitate more successful product innovations. Our empirical evidence is based on data on nearly 2 million apps from Google’s Play Store which we obtained quarterly in 2015 and 2016. We augment these data with information on apps’ privacy-intrusiveness (from PrivacyGrade.org), and on app-specific innovation activity and usage of code libraries (from AppBrain.com). First results suggest both a positive relationship between (1) market power and data access and (2) between data access and innovation. JEL Classification: D12, D22, L15, L86