The digital economy and the growth dynamics of sharing platforms: A transaction cost economics assessment

Abstract

Despite their growing significance in the digital economy, some sharing platforms struggle to achieve sufficient scale, while others fail entirely. By extending the focus beyond network effects and trust-building mechanisms, this paper seeks to identify factors that impact platform growth and to analyze their implications for governance mechanisms and the strategic management of sharing platforms. We center our analysis on transaction costs economics (TCE) and its three key related variables: transaction frequency, transaction uncertainty, and transaction-dedicated investments. Our aim is to examine how these variables determine transaction costs at the platform level and how these costs shape member participation and hence platform growth. To explore our hypotheses, we surveyed a community of members of a digital, peer-to-peer (P2P) sharing platform. Our empirical findings confirm that a platform's growth is significantly affected by transaction features and that, alongside other theoretical approaches, TCE represents an appropriate and complementary lens with which to explore the growth dynamics of sharing platforms, as well as to consider appropriate actions platform owners can take at the organizational, governance, and strategic design levels.