Regulation of data-driven market power in the digital economy: Business value creation and competitive advantages from big data

Abstract

Recent high-profile antitrust cases and policy proposals have put a spotlight on the relationship between firms’ access to big data and sustained competitive advantages in digital markets. In Europe, concerns about data-driven market power have led policy makers to propose far-reaching regulations of information technology (IT) in these markets. Despite the global policy relevance, the regulation of big data and its competitive effects has so far received little attention in information systems (IS) research. This article addresses this research gap by developing an overarching framework for future IS research on the role of IT for the regulation of data-driven market power. The proposed research framework builds upon a three-part analysis: First, we review the academic literature and show that there is extensive, although nuanced, empirical evidence for business value creation from big (user) data. Second, we draw on the resource-based view of the firm and recent policy reports to derive six facilitating factors that enable firms to establish market power based on sustained data-driven competitive advantages. Third, we characterize three regulatory approaches to govern market power and competition in data-driven digital markets: (i) empowering consumers, (ii) data openness and (iii) limiting data scale. For each of these approaches, we highlight the key role of IT artifacts in mediating the effect of regulatory rules on actual practice.

The Role of Big Data in Business Strategy: A Critical Review

“…The research also pointed out the lack of a robust theoretical framework for Big Data analysis, indicating a need for more descriptive and practical reports. Fast et al (2023) addressed the regulation of data-driven market power in the digital economy, focusing on how Big Data creates business value and competitive advantages. Their research developed a framework for future studies on the role of information technology in regulating datadriven market power.…”

The regulation of and through information technology: Towards a conceptual ontology for IS research

“…Regulation of Data-driven Market Power in the Digital Economy: Business Value Creation and Competitive Advantages from Big Data by Schnurr et al, (2023) is the last paper in this special issue. This paper examines the regulation of digital platforms that create natural monopolies by creating big data resources that generate business value similar to monopoly rents.…”

“…Recently, as this special issue demonstrates, the growing dominance of digital platforms has given birth to novel risks which amplify the negative affordances of IT artefacts across most industries and society. Another area of concern highlighted in this special issue is the reliance on complex national and global digital infrastructures (DI) which pose novel risks to individuals, markets, and societies (Gleiss et al,2023;Henningsson and Eaton, 2023;Karanasios et al, 2023;Lindman et al, 2023;Schnurr et al, 2023).…”

Analyzing horizontal integration and market efficiency in platform enterprises: A case study of exchanges

“…The distinctiveness of M&A in trading platforms lies in the possession of substantial user data by both acquiring and acquired parties, as argued by Chen (2020) and Chen et al (2022). Existing studies posit that M&A can bestow competitive advantages upon platform enterprises (Tucker, 2019), enhance the efficacy of targeted advertising (Matz et al, 2019), and enable precise personality marketing (Fast et al, 2023). Furthermore, they suggest that M&A can optimize enterprise decision‐making processes (Grover et al, 2018; Hagiu & Wright, 2020; McAfee & Brynjolfsson, 2012).…”