Performance effects of innovation in two-sided markets: The paradigmatic case of OTAs

Online Travel Agents (OTAs) play an important intermediary role in the two-sided travel distribution market. A critical factor that enhances a firm's competitive advantage is innovation. Yet, the analysis of innovation in the OTA context is scarce. The main objective of this article is to fill this gap and examine the effect of OTA innovations on firm performance. We analyze the effect of two-sided market specific innovations (same-side and cross-side) on performance and contribute to the literature by expanding the theoretical understanding of innovations. We find that producer-to-consumer innovations have a greater effect on OTA performance than producer-to-producer and consumer-to-consumer innovations. A fundamental managerial implication is that exchange management is an area to be enhanced when innovating in travel market distribution.