Managing two-sided B2B electronic markets: Governance mechanisms, performance implications, and boundary conditions

Abstract

Two-sided B2Belectronic markets involve a market-maker platform firm thatcoordinates transactions between the buyer and seller sides of the online marketplace.This paper examines certain formal (monitoring) and informal (procedural fairness) governance processes that platform firms can leverage to manage platform participants. We hypothesize the impact of these processes on sellers’ performance vis-a-vis the platform’s buyers. We also incorporate the platform firm’s structural attributes (self-participation and investments) as moderators of the relationship between platform governance and seller performance. We find that both monitoring and procedural fairness increase seller performance individually. However, the two moderators present opposite interaction patterns: self-participation promotes the performance properties of fairness, but undermines that of monitoring, while investments exhibit an exactly opposite effect. For platform managers, our findings suggest two “choice-packages” comprising different process-structure constellations for enhancing the performance of platform participants.