The Dynamics Of Platform Business Value Creation

By Eliana Garcés-Tolon – 

This paper argues that the technology and economic determinants of value creation in platform businesses have so far not been sufficiently taken into account in the analysis of the conduct of digital platforms. Platforms operate in an environment of extreme interconnectivity, exhibit many externalities and economies of scope and require sophisticated coordination solutions to manage the complex environment they create. This paper describes how the innovation management literature, together with elements of evolutionary theory, complexity, contract theory, and incentive mechanism design, provide the elements of a useful framework to analyze the evolution and behavior of digital platforms. This framework must build on an understanding of the source of value creation in platforms, of the deeply evolutionary nature of such platforms, and of the coordination tools that they can use to operate in a complex and uncertain environment. These tools include prices but also platform rules, contractual relations and integration decisions. Behavior pertaining to such matters can only be understood by taking the whole value generating process of the platform into account.

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