Platform Owners Research Articles

The option value in complements within platform‐based ecosystems

AbstractResearch SummaryWithin platform‐based ecosystems, what drives platform owners' investment decision to enable third‐party complements onto their platforms? Departing from the conventional focus on the complementarity value that these complements add to platform owners, we examine how uncertainty in the complementary product market drives this decision. We offer a novel perspective on third‐party complements—they contain option value allowing the platform owner to defer its own entry into the market. Thus, uncertainty increases investment in enabling complements, especially with greater “downside risk” in the market or learning‐by‐observing. We demonstrate this perspective using numerical examples, simulations, and data on Apple's iPhone ecosystem from 2010 to 2015. This perspective brings together literatures on complementarity value and entry into the complementary market, and indicates that complements generate more than complementarity value within platform‐based ecosystems.Managerial SummaryTo manage complements within a platform‐based ecosystem, the platform owner needs to understand how complements add value. Conventionally, complements are seen to render the platform more attractive. We offer a different view—complements can be seen as real options for the platform owner to learn about the product‐market potential and decide later if it should enter the market with its own product. Using data from Apple's iPhone ecosystem, we demonstrate this option value and show that it is salient when “downside risk” of the market is high or learning‐by‐observing is possible. Our analysis suggests that without considering such option value, platform managers may have underestimated the value‐add of complements on their platforms. Our findings also contribute to recent discussions about platform owners' entry into third‐party spaces.

The Varying Role of Regulation on the Interdependence between Platform Owners and Complementors

This study explores the evolution of interdependence between platform owner and complementors under varying regulations. Using a longitudinal qualitative study on an Chinese online drug retailing platform and its online pharmacies during the period of 2005 to 2021 when they encountered both harsh and favorable government policies, our findings reveals that government regulations toward platform behavior may yield more complex consequences than regulators expected as the regulatory pressure would be transmitted to connected actors, reshaping the form of interdependence. Built upon our findings, we present a process model to elaborate three phases of shaping interdependence under varying regulations: experiment, intensification, and polarization. Our model contributes to the understanding of how platform owner reconciles the need for the continuity of value creation with radical changes in institutional environment. It also shows how complementors are involved into the reconstruction of relationships with platform under regulations—both proactively and passively.

Bounded to the Buy Box: Entrepreneurial Strategies and Power within Platform-based Ecosystems

Contemporary entrepreneurs operate in a consumer culture mediated by a growing number of platform ecosystems. Furthermore, platform survival is dependent upon attracting such entrepreneurial complementors to their ecosystems. Yet, scholars are only recently beginning to grapple with the fundamental differences between traditional and platform-dependent entrepreneurship, particularly the fundamental power asymmetry between platform owners and platform dependent entrepreneurs. To explore power within platform ecosystems, I conducted a field-level ethnography of Amazon seller conferences, complemented by “zooming into” interview and archival data of platform-dependent entrepreneurs. Qualitative analysis revealed ambiguous understandings by all ecosystem members about the domains of actions and interests between the seller, Amazon as the platform owner, and other members of the ecosystems, such as third-party Amazon couriers and overseas manufacturers who often operate on other platforms such as Alibaba. Seller strategies for coping with the ambiguity required manipulation of the boundaries of the platform ecosystem to create a domain for action and shared interest. This research is particularly relevant because the impact of entrepreneurial firms’ embeddedness in platform ecosystems is largely unknown from a sociological perspective.

Voice Mechanisms for Platform-Based Gig Workers

New forms of work, including Platform-based Gig Work and its implication to different stakeholders is at the centre of contemporary academic and practitioner discourse. With the rising popularity of platform-based gig work and an increasing number of workers forming part of the digital workforce, it becomes imperative to identify various challenges encountered by them. Literature has pointed out that the disruption of traditional work structures has led to challenges in form of unfair employment contacts, job security, collective organisation and unionisation. Along with these, absence of voice mechanisms contributes to precariousness and exploitative work conditions. Our paper looks into such challenges faced by the platform-based gig workers in voicing their concerns with respect to various actors namely: platform owners, service requesters, co-workers and regulatory authorities. We propose alternate voice mechanisms and policy signals relevant in context of the new work arrangements.

How Platform Gatekeeping Affects Complementors’ Strategy to Profit from Innovation?

Joining organizational governance research in corporate strategy with emerging research on platform-based markets, we argue that platform owners can leverage gatekeeping as a governance instrument to mitigate information asymmetry in the marketplace, thus shaping complementors’ strategies to profit from innovation. Leveraging the jailbreak of Apple’s iOS 10 as a shock to Apple’s strong gatekeeping policy and using Android app publishers as a control, we show causal evidence that weakened gatekeeping reduces iOS app publishers’ release of paid apps, while increasing their release of free apps with in-app purchase options and apps with advertisement support. The linkage between gatekeeping and a complementor’s value appropriation strategy highlights the critical role of platform owners in orchestrating the multilateral relationships in platform-based organizations.

Some Imperfections of the Modern Economic System

The modern economic system has promoted corporate value creation and capture as well as national growth, but is not lacking imperfections. Platform owners such as Amazon, Facebook, Apple and Google have become dominant, but their stakeholders have suffered under their grip, with loss of privacy and private choice, increased wealth concentration and economic inequality, and overconsumption and abuse of natural resources. I discuss the societal grand challenges linked to these caveats of the economic system, noting that current efforts to remedy this system are unlikely to suffice. I then identify the root cause of these problems, which I attribute to greed and consequent opportunistic behavior. Countering such behavior is a first step towards a solution.

Name Your Price: Platform Design Change and Service Providers’ Responses

When designing a platform, platform owners face a delicate choice of control vs autonomy relative to their service providers. Price-setting is one of the key platform design choices, yet seldom explored in the literature. To the date, literature suggested that platforms should retain control over price-setting when services are relatively homogenous; on the contrary, they should pass the control to service providers in the case of heterogeneous offerings. In order to test this theoretical assumption, we explore the case when price-setting control was granted to workers in a relatively homogenous market. In a quasi-experimental setting, we examine service-providers price-setting behaviour following the platform design change (when the price-setting control was passed on to service providers). We find that in the post-design change period providers were able to leverage their personal characteristics (e.g., higher ratings, job experience) for higher hourly rates. In addition, we find that providers charged higher hourly rates for longer duration jobs and for working on weekends. Taken together, these suggest that service providers are in a position to discover heterogeneity in demand that goes beyond the knowledge of the platform owner. We offer contributions to the broader platform governance literature and the literature on two-sided markets.

How Much Internal Agglomeration is Good in a Mediated Expansion?

While strategic management research has put lots of effort into understanding the battle between the positive and the negative implications of geographical agglomerations, it has mostly been focused on the co-location of independent firms – external agglomeration. The implications of internal agglomerations remain underexplored. Even less attention has been paid to contexts, where agglomerations are mediated by independent firms. Platform markets and franchising firms are common examples. In those cases, the platform owner or the franchisor is making the agglomeration decisions, whereas private vendors/franchises are the ones who directly face their consequences. This is a problem since we do not know whether their interests are aligned. Building on the organizational ecology literature, we argue that a conflict of interest exists but mostly applies to the early expansion stages. We also discuss how spacing the entries in time and geography can mitigate it. We analyze our arguments using 5,955 market entry decisions made by an international money transfer platform organized as a franchising network while entering 426 metropolitan areas in 11 countries in 14 years (2001-2015). The implications for theory and practice are discussed.

Quality vs Exposure Strategy of Platform Complementors: Simulations Using Agent-Based Model

Complementors participating in the platform-based markets pursue either an exposure-oriented strategy to attract more users or a quality-oriented strategy to differentiate from others. In this research, we examine the effect of complementors' strategies on their performance and other stakeholders in the platform. Using agent-based model simulations, we model the behaviors of complementors and users in multiple market competition scenarios in the context of the mobile app market. Based on the simulation results, we derive a set of propositions on which strategy that complementors choose relates to the benefit of other stakehoilders. For platform owners, maintaining a more quality-based competition landscape yields the best outcomes. However, in the early stage of the competition, exposure-seeking complementors outperform quality-seeking complementors, leading new entrants to allocate their resources into exposure strategies. In the long run, high-quality complementors are likely to win the game, but they have to survive the early stage when they are surrounded by exposure-seeking competitors. The results also suggest that complementors may be motivated to contract brokers, what we call an agency in the paper, when there is a mismatch between their strategy and capabilities. We identify the types of agencies that complementors are likely to hire, depending on their strategies and the market competition.

Transforming Matters of Concern into Platform Worth

As platforms proliferate across industries, there is growing recognition that they have the potential to impact societal goals, not just economic ones. Using the concepts of matters of concern, perceived affordances and perceived worth, this study focuses on how platform owners construct the value of a digital platform by considering both economic and non-economic values during the initial phases of its conceptualization and development. The paper presents and discusses the findings from a qualitative study of an emerging agricultural data-sharing platform under development through a multi-actor collaboration in Sweden. It shows that by starting with matters of concern and matching those with potential data-based solutions, a number of perceived affordances could be articulated and transformed into potential worth of the platform from economic, environmental and social perspectives. The research proposes that viewing digital platforms beyond their economic potential during platform emergence is important for constructing platforms that go beyond single firm interests and include industrial and societal worth.

Content Monetization on Social Media Platforms

One thing social media platform owners want to do is increase the value of the content on their platform, to better engage their users. There are two kinds of platform content value – content quantity value, where having more content naturally makes a social media platform more attractive, and community engagement value, where the “attractiveness” of the content draws in and retains users. Substantial research suggests the introduction of financial incentives is one viable strategy. However, what are effective mechanisms for delivering financial incentives remains unknown. One financial incentive mechanism recently introduced to social media platforms is paid Q&A, where people answer specific questions from other users in exchange for a market-determined fee. Does paid Q&A improve platform content value? We study this question in a natural experiment on Weibo Q&A, which introduced a paid Q&A feature into its user content mix. We find that while paid Q&A reduced the quantity of free content, overall, the total amount of content increased. Furthermore, the community engagement value of content as measured by number of likes and forwards increased. This suggests that the introduction of paid Q&A incentivizes users to generate content that genuinely increases the platform content value. Our findings add to the literature by studying how financial incentive systems change behavior in a real social media platform with an existing incentive mix, and by identifying social media platform design features that increase user engagement.

Media Production Logics in Triple-Party News-Spaces: A Five-Dimensional Framework

The digital environment is dominated by platforms non-proprietary to the news media, such as Facebook and Twitter. On these platforms, news organizations occupy what is termed here triple-party news-spaces: digital spaces that involve a news publisher, a platform owner, and users. Drawing on 28 interviews with professionals working for 14 news organizations in the U.S. and Israel, this study offers a framework for understanding the underlying logics of media production in triple-party news-spaces. It does so while building on the theoretical construct of media logics and the notion of a hybrid media system. Under the proposed framework, the production logics comprise five dimensions: item selection, temporality considerations, hierarchy considerations, expression style, and approach toward UGC. The study reveals what norms are applied and how—along each dimension and in different national/cultural contexts. It thereby advances understanding of news organizations’ activity on platforms that play a key role in distributing digital content.

Understanding platform transformation from internal to external: A resource orchestration perspective

The phenomenon of transformation from an internal platform to an external platform has attracted increasing research attention. However, the transformation process is still unclear. This study aims to uncover how internal platforms transform into external platforms. By adopting a case study method and taking resource orchestration as a theoretical lens, our findings generate a three-stage process model, which specifies the relationships among strategic sense-making of platform owners, resource orchestration, and capability in the path breaking, path creation, and path dependence stages. This study contributes to understanding the transformation process from an internal platform to an external one and thus bridges the literature on internal platforms and external platforms.

Service Delivery and Branding Management in Digital Platforms: Innovation through Brand Extension

Purpose. Resources and experiences may give platform owners an advantage to expand their business to new areas of possible growth. However, can the winner take it all? Or is the spandex rule—“just because you can, does not mean you should”—valid for platforms, as well? The present study is aimed at narrowing this research gap by focusing on the innovation through brand extension impact on customer satisfaction and brand loyalty in an ever-greater area of the service sector. Design/Methodology/Approach. The partial least-squares structural equation modelling (PLS-SEM) is applied to analyse the questionnaires and explore the relationships between the proposed research model’s constructs. Findings. The results reveal that service innovation through brand extension impacts customer satisfaction and loyalty favourably. Customer satisfaction mediates the relation between innovation through brand extension and brand loyalty. Parent brand reputation intensifies service innovation through the impact of brand extension on customer satisfaction and loyalty, while perceived risk deters its effects. Customer innovativeness enhances customer satisfaction. Finally, perceived category similarity (fit) augments customer satisfaction while impacting loyalty negatively. Practical Implications. The findings provide a deeper understanding of innovation and brand management in digital platforms and forge a promising path forward for marketing researchers investigating the platform economy. Originality/Value. Little remains acknowledged regarding the theoretical interface of innovation through brand extension in the digital platform sphere and its consequences on customer behaviour. Building on this lacuna, the authors adopt an underexplored object that focuses on digital platform innovation through brand extension, customer satisfaction, and brand loyalty.

Developing design principles to standardize e-commerce ecosystems

Platform ecosystems have captured a variety of markets, enabling coordination, transactions, and value co-creation between independent actors. A focal platform constitutes the central nexus of e-commerce ecosystems and fosters the interaction among ecosystem participants through their boundary resources. Standardizing these interfaces simplifies ecosystem entry for developers and increases the number of participants propelling the network effects, and thus the overall value of the ecosystem. Currently, there is a lack of prescriptive design knowledge guiding platform owners in designing successful e-commerce ecosystems. Addressing this issue, we followed a dual approach, reporting on a systematic literature review in which we identified design requirements and complemented these with a multiple-case study on selected e-commerce ecosystems. Aggregating the requirements resulted in six meta-requirements and 19 design principles that foster the standardization of focal e-commerce platforms. Our design principles simplify the development of complements and enable multi-homing for developers due to possible standardization across ecosystems.

Platform subsidy policy design for green product diffusion

With the advent of information technology, online platforms have become an vital intermediary for acquiring green information and purchasing green products. This study uses two-sided market theory to estimate the size of the green market for green subsidies under various targets. First, we compare the differences in the equilibrium market size and platform profits for three scenarios (no subsidy, maximum platform profits, and maximum social welfare). In addition, we measure the basic conditions for start-up subsidy schemes. Finally, we employ numerical analysis to explore how other critical factors, including cross-network externalities, product pricing, and research and development (R&D) costs, impact the market size in three scenarios. The result demonstrates how online platforms use cross-side network externalities to design asymmetric pricing strategies or subsidy policies to develop the market for green products. It has managerial implications for online platform owners or politicians in subsidizing the expansion of green products.

Legal Aspect of Applying Price Parity Clauses by Digital Platform Owners

The article contains a legal analysis of the price parity clause. Its types from the point of view of Russian and foreign competition law. A number of decisions of Russian and foreign courts, antimonopoly regulators made on the basis of antimonopoly investigations against owners of digital platforms who used the clause on price parity in entrepreneurial activities were considered. A comparative analysis of these decisions was carried out to identify similarities and differences in approaches to the legal qualification of the actions of the owner of the digital platform on the use of the price parity clause. In particular, in the countries of the European Union, antitrust regulators and courts have qualified the relevant actions of the owner of the digital platform as a violation of the legislative ban on the conclusion of vertical agreements restricting competition. The Russian antimonopoly regulator and the courts qualify the actions of the owner of the digital platform as a violation of the ban on abuse of dominant position in the relevant commodity market.The article also considers the approaches of Russian and foreign competitive departments, courts to determine the boundaries of commodity markets, the participants of which are the owners of the digital platform.

EBDF: The enterprise blockchain design framework and its application to an e-Procurement ecosystem

Blockchain technologies have seen a steady growth in interest from industries as the technology is gaining maturity. It is offering a novel way to establish trust amongst multiple stakeholders without relying or trusting centralised authorities. While its use as a decentralised store of value has been validated through the emergence of cryptocurrencies, its use case in industrial applications with multiple stakeholder ecosystems such as industrial supply chain management, is still at an early stage of design and experimentation where private blockchains are used as opposed to public blockchains. Many enterprise blockchain projects failed to gain traction after initial launches, due to inefficient design, lack of incentives to all stakeholders or simply because the use of blockchain was not really necessary in the first place. There has been a need for a framework that allows blockchain designers and researchers to evaluate scenarios when a blockchain solution is useful and design the key configurations for an enterprise blockchain solution. Literature on blockchain architectures are sparse and only applicable to specific use cases or functionalities. This paper proposes a comprehensive Enterprise Blockchain Design Framework (EBDF), that not only identifies the relevant use cases when a blockchain must be utilised, but also details all the characteristics and configurations for designing an enterprise blockchain ecosystem, applicable to multiple industries. To validate the EBDF, we apply the same to the Vortal e-Procurement ecosystem allowing for multiple platforms to interoperate with greater transparency and accountability over the proposed blockchain framework. In this use case, many vendors bid for procurement procedures, often for publicly managed funds where it is extremely vital that full transparency and accountability is ensured in the entire process. Ensuring that certain digital certification functions, such as timestamps are independent from e-Procurement platform owners has been a challenge. Blockchain technology has emerged as a promising solution for not only ensuring transparency and immutability of records, but also providing for interoperability across different platforms by acting as a trusted third-party. The applied framework is used to design a Hyperledger based blockchain solution with some of the key architectural elements that could fulfil these needs while presenting the advantages of such a solution.

Effects of introducing an online community in a crowdsourcing contest platform

AbstractCrowdsourcing platform owners and operators constantly search for ways to improve contestant performance. One novel proposal for improving performance is the introduction of an online community to the crowdsourcing contest platform. However, research regarding the potential benefits of an online community on such platforms is unclear. Furthermore, prior research often assumes the single dimensionality of prior experience, whose impacts on crowdsourcing performance are also inconclusive. Building on knowledge collaboration and cognitive diversity research, we model the direct effects of introducing an online community on contestant performance and the moderating effects of the amount of experience and experience diversity. Leveraging a natural quasi‐experiment in a large crowdsourcing contest platform, we collected 24 months of contestant data to test our hypotheses. Our propensity score matching and difference in differences analysis demonstrated that contestants' performance (winning contests and crowdsourcing income) increases significantly with the presence of an online community. Additionally, the positive effect of an online community on performance is more pronounced for contestants with less experience and those with more diverse experience. Our findings provide insights into the causality of incorporating an online community and inform community investment decisions for crowdsourcing contest platforms.

Anchored Inferential Learning: Platform-Specific Uncertainty, Venture Capital Investments by the Platform Owner, and the Impact on Complementors

Platform owners increasingly make corporate venture capital investments in complementors (e.g., app developers) to stimulate value creation, a practice we refer to as platform venture capital (PVC). Interested in the implications of PVC for other complementors, we investigate how PVC investments affect their product introduction and withdrawal decisions. Given that complementors confront platform-specific uncertainty concerning the strategic directions of the platform, which is asymmetrically set by the platform owner, we theorize that complementors leverage PVC investments as devices for anchored inferential learning. That is, because PVC investments are costly, visible, and consequential, complementors will infer them as credible indicators of the platform’s future focus. Consequently, we predict that complementors will seek out, and stick around, product categories of PVC investees. We further anticipate that these inclinations are weaker for complementors with greater platform ecosystem experience that place more emphasis on knowledge acquired via experiential learning, and stronger for complementors that center their business exclusively on the platform and therefore rely strongly on PVC to navigate platform-specific uncertainty. We provide quantitative evidence from the context of the Salesforce platform. Moreover, we draw on qualitative data from this context to unpack why complementors interpret PVC investments as a credible signal concerning the strategic direction of the platform. We highlight that complementors consider PVC as a form of middle-ground platform governance, where the platform owner is perceived as being committed to stimulating value creation in the platform ecosystem, while also inducing complementors to commit their efforts to the platform ecosystem.Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.1607 .