Online digital platforms organize and mediate an ever-increasing share of economic and societal activities. Moreover, the opportunities that platform-mediated markets offer not only attract enormous numbers of entrepreneurs, but also support the growth of entire ecosystems of producers, sellers, and specialized service providers.
The increased economic and business significance of digital platforms has attracted an outpouring of studies exploring their power dynamics and general impact. And yet, to date, this research has overlooked the power imbalance that entrepreneurs experience as members of the platform ecosystem, and provided little guidance on how these far more numerous firms should compete.
Drawing upon Emerson's power-dependence theory, we show that the power asymmetry at the heart of the relationship between the platform and its ecosystem members is intrinsic to the platform design, the technological architecture and the contractual agreements between the parties.
We undertake a conceptual analysis of the sources of this power, and we unravel the novel component of risks that emanate from this imbalance. Our analysis suggests that the conditions of engagement for platform entrepreneurs are so different from traditional entrepreneurship that these entrepreneurs are more usefully termed "platform-dependent entrepreneurs (PDEs).
Further, we explore the strategies that PDEs are developing to mitigate their dependence. Finally, our study provides a framework for policy makers that are considering regulating platform-organized markets.
Martin Kenney is a Professor in Community and Regional Development at the University of California, Davis; a Senior Project Director at the Berkeley Roundtable on the International Economy; and Senior Fellow at the Research Institute for the Finnish Economy.
Kenney’s scholarly interests are in the dynamics of entrepreneurial high-technology regions, university-industry technology transfer, the development of the venture capital industry, and the impacts of new technologies on industrial structures and labor relations.