the role of apis in the economy - boston university · application programming interface ease...

The Role of APIs in the Economy

Seth Benzell, Guillermo Lagarda, Marshall Van Allstyne

Boston University and MIT

July 12, 2016

Seth Benzell, Guillermo Lagarda, Marshall Van Allstyne (Boston University and MIT)The Role of APIs in the Economy July 12, 2016 1 / 16

Introduction

We construct a novel data set combining API proxy statistics withfirm financial outcomes

Firms adopting API strategies are concentrated in Retail

We find that firms that adopt APIs are significantly more profitable inyears after adoption

We find weaker suggestion that the intensity of API use correlateswith net income

In future work we seek to establish causality and the contribution ofAPIs to changes in the nature of the firm and macroeconomic trendslike SBTC

Seth Benzell, Guillermo Lagarda, Marshall Van Allstyne (Boston University and MIT)The Role of APIs in the Economy July 12, 2016 2 / 16

Context

Application programming interface

Ease access to data, internal and external

Increase programmer productivity, information security, lowermaintenance costs, modularity/re-usability

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Context

We work with API management firms

Some have specific strategy in mind, others simply ’go digital’ andput info out there

Clearly APIs necessary for platform/ecosystem approach

Lots of API success stories

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Web API Growth (Source: ProgrammableWeb.com)

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Data

Currently we have data corresponding to roughly 10 percent of theAPI management industry

We are working towards:

Collecting another about 40 percent of industry

Integrating OSIRIS

Finding employment by job title data

Firm survey

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Sample Firms Using API Management

Seth Benzell, Guillermo Lagarda, Marshall Van Allstyne (Boston University and MIT)The Role of APIs in the Economy July 12, 2016 7 / 16

API data - Quarterly

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Financial Characteristics of API Adopting Firms

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Preliminary Data Analysis

Three Current Approaches to Ascertaining Impact on Net Income

Firm FEs

Nearest Neighbor

General Difference in Difference

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TreatmentEffectEstimationOutcomeVariable:NetIncome

TreatmentVariable:AdoptionofAPI(Binary,adjustedintime)

Baseline Leverage Baseline LeverageATE 162.46** 186.22* 267.78** 222.59**

(12.89) (17.13) (6.85) (7.39)ATE(OpenPlatform) 52.35+ 52.29*

(6.89) (7.13)CapitalExp. -0.0864 -0.0229+ -0.0484 -0.0200+

(6.32) (6.79) (6.32) (6.79)Leverage -0.0461+ -0.0461+

(7.54) (7.54)Constant 22.49** 32.28** 17.49** 16.28**

(9.01) (19.21) (11.93) (23.75)Std.Errorsstatisticsinparentheses

+p<0.10,*p<0.05,**p<0.01

Regression(IPW) PropensityMatch

NearestNeighbor

Regression(IPW)

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Log Net Income Grouped by Adoption Date

5

6

7

8

9

10

11

Mar-10 May-11 Jul-12 Sep-13 Nov-14 Jan-16

2013Q1-Q3

2013Q4-2014Q1

2014Q2-2014Q4

2015

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Future Goals

Future Directions for Research

With time series employment data, very interesting SBTC paper.Allows us to study programmer productivity as accumulating asset.

With more information about firm ecosystem policies, structural IOpaper estimating elasticities around platform strategy

With a better instrument (or perhaps only more data), a strongbusiness oriented paper about consequences of API strategy adoption– Advice?

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