Firms' multi-sided platform construction efforts and ESG performance: An information processing theory perspective

Abstract

This research explores the impact of business-to-business (B2B) firms' efforts to construct technology-enabled multi-sided platforms (MSP efforts) on their ESG performance through an information processing theory (IPT) lens. Integrating the literature on digital transformation and MSPs, we delineate firms' MSP efforts along with three dimensions (digital operation efforts, technology sharing efforts, and flat management efforts) and posit that each addresses specific challenges associated with the environmental, social, and governance components of ESG performance. Using a sample of 213 publicly listed Chinese firms, encompassing 1527 firm-year observations, we measure the variation in the three dimensions of MSP efforts through a deep neural network-based latent Dirichlet allocation topic model to analyze their annual reports. We find that digital operation efforts enhance environmental, social, and governance performance; technology sharing efforts primarily improve environmental and social performance; and flat management efforts boost only governance performance. In addition, these effects are more pronounced for large firms than for small firms. Two robustness checks, employing patent applications and granted patents as alternative indicators of firms' MSP efforts, further corroborate these findings. This research augments both the MSP and ESG literature, offering actionable insights for firms, governments, and non-governmental organizations.