Regulating platforms and ecosystems: an introduction

Abstract

Digital technologies and modular production methods have led to the emergence of a new generation of global leaders which cement their market position by orchestrating digital platforms and ecosystems of complementors, which offer them new ways to create and capture value that often transcend the boundaries of existing sectors. Their business models, built on intangibles such as software code and access to data, support expansion that is both breathtakingly rapid and effectively costless. With capital markets all too willing to invest in these firms’ growth, and regulators unable to rein them in, these firms have been able to accumulate unprecedented power and wealth, with profound implications for competition, the economy, and society itself. This special issue confronts the challenge of regulating platforms and ecosystems head-on, revisiting the economic, strategic, and legal foundations that enable us to detect and redress issues of dominance and competition and address questions of the appropriate conception of and limits of the law. The papers included cover topics including the true nature of competition with an emphasis on dynamics and innovation, new approaches for legal and economic analysis including the alternatives for the “welfare criterion” and the protection of sunk investments, the approaches to take on tech mergers and acquisitions, the virtues and limits of self-regulation, the potential for radical breakups of Big Tech, and the issues of data, when privacy protection and competition steer us in different directions. Contributors also weigh up the case for regulatory intervention, the practical challenges involved, and the future state that we hope such actions will bring about.

Managing a blockchain-based platform ecosystem for industry-wide adoption: The case of TradeLens

“…Fourth, this study finds that the platform sponsor must proactively work on the platform regulation (Cusumano et al, 2021;Jacobides and Lianos, 2021) and create bylaws for paperless trade because current laws and regulations do not adequately address the legal framework for digital and, especially, blockchain-based trade (Goldby, 2016). This research contributes to the emerging literature on interoperability governance (Wimmer et al, 2018) by underscoring both interoperability with different legacy systems and competing platforms (Ziolkowski et al, 2020) as vehicles to increase the perceived usability of the platform but also to decrease the risk of platform lock-in and platformspecific investments (Ozalp et al, 2018).…”

“…Consequently, a platform sponsor needs to design various off-chain governance mechanisms that would address the inter-organizational concerns of prospective actors (Kostić and Sedej, 2022;Schmeiss et al, 2019;Uzunca et al, 2022). Still, issues concerned with establishing platform interoperability and the associated process of digital standardization (Rossi et al, 2019), and, more broadly, platform regulation (Cusumano et al, 2021;Jacobides and Lianos, 2021) are underexplored in the platform literature. These concerns are all connected to lowering the barriers to platform ecosystem adoption and harnessing the potential of blockchain technology (Kumar et al, 2020).…”

Governing digital platform power for industrial development: towards an entrepreneurial-regulatory state

“…Digital platforms typically operate in multi-sided markets characterised by direct network effects between users on one side (where an additional user increases the value of the service to others on that side), as well as indirect and cross-side network effects where additional users on one side of the market increase the value to those on other sides (Condorelli and Padilla, 2020;Jacobides and Lianos, 2021A).…”

“…The origins of the digital platforms mean that United States and China account for 90% of the market capitalisation value of the world's 70 largest digital platforms. Seven 'super platforms' -Microsoft, Apple, Amazon, Google, Facebook, Tencent and Alibaba − account for two-thirds of the total market value (Jacobides and Lianos, 2021A;Rikap and Lundvall, 2021;UNCTAD, 2021). Google has some 90% of the market for Internet searches.…”

“…The tendency to concentration and economic power is inherent in the economics of platforms, as it is in the rationales for the internationalisation of business (Cowling and Sugden, 1987;Cowling and Tomlinson, 2011). As we explain further below, this is because of the combination of network effects, scale economies and data which are international in scope (Condorelli and Padilla, 2020;Jacobides and Lianos, 2021A;Jenny, 2021).…”