Platform Dependent Entrepreneurship: Navigating Precarity

Complementors must recognize (and mitigate) the power asymmetries and the uncertainty endemic to platform-based markets

This blog is written by Donato Cutolo and Martin Kenney.

Within less than three decades, platform ecosystems have become dominant structures shaping a range of markets and industries. This is visible in the rapid growth in the number and size of online platforms offering value propositions to users and firms. The sheer size of these markets and the millions of businesses that have moved their operations to, or were created on, platforms means that we have entered what can be characterized as the Platform Economy. With this shift, online platforms increasingly mediate economic transactions and social relationships. This appears to be irreversible.

There have been tremendous benefits for both entrepreneurs and existing businesses. Platforms connect businesses to customers they could not otherwise reach and provide various tools and resources, enabling them to easily and quickly grow their business. And yet, these remarkable business opportunities create a strong dependence upon a profit-maximizing platform owner that is only responsible to its shareholders. In our article, published in the Academy of Management Perspectives, we delve into the challenges of platform-based entrepreneurship, recognizing how the power imbalances generate new risks for every complementor dependent on a platform (or considering becoming so).

Of course, the fundamental source of power for online digital platforms is their attractiveness, particularly in situations where they control access to users with a monopoly or monopsony position due to the winner-take-most aspects in many of these markets. Participation has become necessary for many companies’ survival and growth, as potential buyers and competing firms are enticed by the opportunities platform-organized markets offer. Given the winner-takes-most features of network-based industries, platform dependence increases as the availability of viable alternatives outside the platform decreases. 

Platform power is ultimately embedded and expressed in its software architecture and terms and conditions. This is where the rules are embodied and where subtle changes in the software’s algorithms or terms of participation, such as fees, the earning structure, or product acceptability can nullify any business strategy. This power can be used to direct attention and orient behaviors, and, more importantly, it provides incalculable advantages to the platform. For instance, direct control of the technological infrastructure upon which all activities are conducted allows the owner to identify particularly innovations or business models that can be encouraged, emulated, or destabilized depending upon the interests of the platform. 

Consider the plight of a new startup that develops an exciting, innovative app to sell through an app store. This venture is entirely at the mercy of the app store owner. To illustrate, repeatedly, Apple has embedded formerly externally provided “killer” apps into its installed software, thereby destroying that innovators “rents.” Similarly, previously approved apps have been removed unilaterally without warning, and this can occur even as the platform introduces its competitive app. The point, of course, is that in its private marketplace, the platform owner is a potential competitor that controls the rules and can rewrite the rulebook at any second. 

In the case of any platform decision, appeals are routed to an anonymous, all-powerful Kafkaesque bureaucracy. The rules for generating decisions are largely opaque. In other words, all the players, many of whom are forced onto the platform due to necessity, are in a state of continuous fear, precarity, and doubt. They can appear both capricious and draconian, and all efforts to get the platform owner’s attention may be futile.  

This reality means that platform-based entrepreneurs must be aware of these risks and dangers and, from the beginning, understand their options. While uncertainty has always been a defining characteristic of entrepreneurship, platforms come with new forms of uncertainty surrounding both market structure and demand that are endogenous, self-interested, and opaque: competing on platforms means competing with other complementors and potentially the platform itself. In another article, written with Andrew Hargadon and published in the MIT Sloan Management Review, we discuss some strategies that platform-based firms can experiment with to leverage the platform’s resources without becoming subservient.

One of the most potent ways a platform-based entrepreneur can address the risks associated with platform dependence is to multi-home. There are three general types of multihoming. The first is the classical case, where a firm operates through multiple platforms. The second type is channel multihoming, where a platform-based firm uses different channels, e.g., sells on a platform, operates its own website, and may even establish a physical store. Generating off-platform income streams is an important strategy to protect a platform-based business, and if extremely successful, it may allow disintermediation of the platform. The final one is platform multiplexing, where platform-based entrepreneurs adopt the different tools available from various platforms to develop new value propositions, reach new customer segments, or build new organizational capabilities that would not be possible on any single platform.

Sometimes platform-dependent firms can even join forces to collectively maximize their positions’ effectiveness and defensibility. For example, in 2018, after AbeBooks, an Amazon subsidiary, abruptly banned booksellers from several countries due to what it said was the increasing cost and complexities of operating in those countries, antiquarian book dealers from 27 countries pulled more than 3,700,000 books from the platform. After two days of protest, Amazon apologized and retreated.

Finally, and most interesting, is the fact that platform-dependent ventures are becoming more proactive and engaged with governments and the legal system. This can occur at the individual level through actions such as the lawsuit between Epic Games and Apple. But, more importantly, at the systemic level, such as, supporting the development of novel and innovative regulatory frameworks to mitigate platforms’ power. At a more systemic level, the question is whether there are solutions that maintain the benefits of platforms and sustain the incentives to generate them while protecting the community of those who buy or run a business on the platforms. Of course, building upon Karl Polanyi’s observations regarding the rise of capitalism, in another venue we argued that it is normal for the rest of society to react to a transformational change in the organization of capitalist economies with regulations to redress massive imbalances of power. While colleagues, Michael Cusumano, David Yoffie, and Annabelle Gawer recognize this and have recommended that the online platforms self-police themselves, state intervention may be necessary because, as Lord Acton, perhaps, hyperbolically, cautioned us, “power corrupts but absolute power corrupts absolutely.” Policymakers in the US, EU, China, and other jurisdictions are expanding their focus to consider the subordination of ever-greater parts of the economy to a few powerful platforms and their owners.  

In sum, despite, and because of, the great opportunities offered, new and established firms are increasingly attracted and locked into platform markets and become entirely dependent upon them. As these platforms continue to intermediate ever-greater parts of the economy, entrepreneurs who depend on platforms must develop strategies to mitigate the uncertainty endemic to platform-based business environments. 

This blog is based on Donato and Martin’s research published in the Academy of Management Perspectives, which is included in the platformpapers reference dashboard:

Cutolo, D., & Kenney, M. (2021). Platform-dependent entrepreneurs: Power asymmetries, risks, and strategies in the platform economy. Academy of Management Perspectives, 35(4), 584-605.

Platform Power and Platform Bias in the Music Industry

Do Spotify curated playlists influence our listening decisions? And, are these playlists biased?

This blog is written by Luis Aguiar.

Many online markets have come to be dominated by large digital platforms in recent years, prompting concerns about potential abuse of market power and stirring important public policy debates. In 2020, the European Commission announced its Digital Markets Act, a new proposal about the regulation of large digital platforms that potentially act as gatekeepers in their respective industries.1 With the ability to determine what – and how – information is provided to their consumers and the amount of exposure given to their suppliers, digital platforms are indeed well-positioned to influence which products ultimately succeed.2

Like numerous other sectors, the music industry and its structure have been drastically affected by digitization. Prior to the Internet, decisions about which songs to distribute and promote were made by record stores and radio stations in rather fragmented markets. With the advent of music streaming, a few platforms are now performing both the promotional function of radio stations as well as the revenue generating function of record stores. Because digital technologies have allowed to drastically reduce the costs of producing music, another effect of digitization has been an astounding growth in the number of new songs made available to consumers. As of 2022, Spotify’s catalogue included a total of 70 million tracks.

Against this backdrop, an important value-creating function of music streaming platforms is to help consumers find products that they like. They do so in large part by relying on playlists – which are both informative lists of songs and utilities for listening to music – to promote new as well as established songs to their users. Any user is free to create playlists on Spotify, but the most followed lists on the platform are controlled and operated by Spotify itself. Of the top 1000 most followed playlists on Spotify, 866 are controlled by Spotify, and their cumulative followers account for 90% of the followers of these 1000 lists. If these playlists affect individuals’ consumption decisions, then Spotify can play an important role in determining song and artist success, including the determination of which songs and artists are discovered in the first place. In this context, it is therefore natural to ask the following questions. First, does Spotify have power to influence users’ listening decisions, via its playlists? Second, does Spotify exercise that power in a biased fashion?

Is Spotify powerful?

In a recent paper, we explore whether Spotify has the ability to influence users’ listening decisions through its playlists. More specifically, we ask whether playlist inclusion affects the number of streams that songs receive and whether it affects consumers’ discovery of new songs and artists.

Playlists and promotion

We focus on distinct types of playlists, all operated by Spotify. First, we assess the impact of the four largest global playlists – which offer the same content to any user around the globe – on song performance. The playlists we focus on are Today’s Top Hits, RapCaviar, Baila Reggeaton, and ¡Viva Latino!, which are generally used to promote already widely known artists and songs. Because they have a large base of followers, any song that is added to one of these playlists will witness a sharp increase in the number of users exposed to it. These discontinuous jumps in followers allow us to identify a causal effect by looking at how streams change right at the time of playlist inclusion.

We estimate that the average effect of appearing in Spotify’s most-followed playlist, Today’s Top Hits, is of around 260,000 worldwide daily streams. Because songs tend to stay on this playlist for about 74.4 days, the overall effect of appearing on Today’s Top Hits is of about 19.4 million streams. It follows that about a quarter of the average streams for songs that make the playlist is caused by having made the list. And given Spotify’s recent reported payments of roughly $4 per thousand streams, this translates to about $77,000 in payments from Spotify alone.

Playlists and product discovery

Second, we consider playlists that specialize in new music, and potentially new artists, as opposed to already known songs. Every week, Spotify constructs a rank-ordered list of 50 new songs – called the New Music Friday lists – for each country in which it operates. As their name indicates, these playlists are updated every Friday and generally include songs that are literally new to Spotify, providing consumers with new information and potentially promoting the discovery of new songs and artists.

Does appearing on the New Music Friday lists increase the probability of a song’s ultimate success? Figure 1 presents the share of songs at each New Music Friday rank that ultimately appear in the corresponding country’s Top 200 streaming charts. It shows that songs with better ranks are more likely to appear in the top of the daily charts. For instance, close to 85 percent of the songs ranked #1 in a country’s New Music Friday list appear in the country’s top 200 daily streaming charts. While this suggests that high recommendation ranks matter for performance, the relationship depicted in the figure is also driven by the ability of curators to predict which songs are going to be successful. But the New Music Friday lists are also characterized by the fact that songs tend to appear in different ranks across countries. For instance, a given song may be ranked 5th on the New Music Friday list in the US, but only 16th in the New Music Friday list in Canada. Would this song be more likely to succeed in the US, where it got a better rank, relative than in Canada?

Assuming that countries have similar tastes but are treated with different rankings, we can measure the effects of the New Music Friday rankings by comparing the streaming performance of the same songs in different countries where they have received different rankings. We find that songs that obtain a #1 rank on the New Music Friday lists are about 50 percent more likely to appear in the streaming charts (relative to a song ranked 50th) and this effect falls sharply with the rank, to about 18 percentage points at rank 10 and to about 4 percentage points at rank 20. Focusing on new artists only provides similar results, indicating that the New Music Friday lists indeed help in the discovery of new artists.

So Spotify is powerful, but is it biased?

The above analysis shows that Spotify – through its largest playlists – has the power to influence artists and their products’ commercial success. But does Spotify exert this power in a biased fashion? Of particular interest is the question of whether major and independent music labels are treated differently by Spotify. While the platform does not own any of the music in its catalogue, major labels do have ownership stakes in Spotify, which could give the platform incentives to provide advantageous promotion of their products.

In a recent paper, we ask whether the rankings of the New Music Friday lists are biased against music from independent labels. We assume that the curators of the New Music Friday lists rank songs in order to maximize the total streams of the listed songs, which amounts to positioning songs that are expected to perform better higher up the ranks. And indeed, Figure 1 above shows that this is a reasonable assumption, and ranks assigned on the lists can therefore be interpreted as a measure of the curators’ ex-ante assessment of a song’s future success.

To test for bias, we can then compare the streaming performance of indie and major songs that were assessed to have equal promise (i.e. that received the same rank). If, say, major songs outperform indie songs in terms of streams, then the ranking is biased against majors since they should have been awarded a better rank. And indeed, Figure 2 shows that major-label songs stream more, conditional on the rank they are assigned.

Given the important concerns about the treatment of women in the music industry, one may also consider the possibility of bias against music from female artists. What we find, perhaps surprisingly, is that songs my male artists tend to stream more than songs by women, conditional on rank. See Figure 3.

Spotify’s New Music Friday ranks therefore appear to favor music by indie artists and, to a lesser extent, music by women. Additional calculations show that curators appear to rank songs as if they valued indie streams about 40 percent more than major label streams, and music by women about 10 percent more than music by men.

It is hard to say why Spotify would behave in such a biased way, but one can speculate. It might be that promoting music from independent labels could create a more favorable environment for future streaming rate negotiation, by deconcentrating market power from the major labels. Spotify may also be responding to criticism  from the industry, leading the platform to actively promote work from the groups voicing concerns.

Our analysis is naturally not without caveats. First, even if the New Music Friday lists favor independent-label music and music by women, we cannot rule out that other playlists, and other promotional activity at Spotify, favor different sorts of music. One should also be careful not to interpret our results as evidence that these groups face a generally welcoming environment in the recorded music industry.

Beyond its interest for music industry participants, our results and approach should be of relevance for observers of platforms more generally. In particular, our approach to measuring platform bias can be applied in any context  where a platform ranks products, and where one can observe the ex-post success of each listing, such a click through rate.

This blog is based on Luis’ research published in the International Journal of Industrial Organization and The Journal of Industrial Economics, which is included in the platformpapers reference dashboard:

Aguiar, L., & Waldfogel, J. (2021). Platforms, power, and promotion: Evidence from spotify playlists. The Journal of Industrial Economics, 69(3), 653-691.

Aguiar, L., Waldfogel, J., & Waldfogel, S. (2021). Playlisting favorites: Measuring platform bias in the music industry. International Journal of Industrial Organization, 78, 102765.


Accordingly, one of the important concerns highlighted in the European Commission’s DMA is large platforms’ ability to provide preferential treatment to products that they offer themselves on their platform. In 2017, for instance, Google was charged by 2.4 billion euros by the European Commission for unfairly favoring some of its own services over those of competitors. See

Catching Fyre: Platform Diffusion and the Technology Strategy Toolkit

How hackatons can boost the diffusion of platform technologies.

This month’s blog is co-written by David Clough, Tommy Pan Fang, and Andy Wu.

In 2017, an entrepreneur named Billy McFarland created a successful viral marketing campaign for a bold, new music festival called Fyre Festival. Unfortunately, McFarland’s logistical ability did not live up to his aptitude for spin. The festival itself was a disaster, documented in real time through Instagram posts that morphed into icons of superficial influencer culture. Lost in the legend of the Fyre Festival fiasco is the lesser-known detail about its actual intended purpose: McFarland organized the event to draw attention to Fyre Media, a new technology platform for event organizers to connect with musicians—an “Uber for the performing arts.”

Contrast this with the experience of Twitter, who in 2007 installed a pair of giant flat-panel screens at Austin’s South-by-Southwest (SXSW) festival, an eclectic annual gathering of media, film, and technology professionals. Users could find their tweets broadcast on the giant screens at SXSW by texting a short message to Twitter. As Parker, Van Alstyne, and Choudary (2016:97) describe, this served as a pivotal moment in the launch of Twitter: “seeing the feedback on large screens in real time and watching as thousands of new users jumped into the fray created enormous excitement around Twitter…by the end of SXSW, Twitter usage had tripled, from 20,000 tweets per day to 60,000.”

In their efforts to launch a new platform, Fyre Media and Twitter both sought to exploit what we refer to as a temporary gathering, albeit with radically different outcomes. We set out to investigate when, how, and why new and growing platforms might use temporary gatherings to attract new users and new third-parties—such as App developers—who act as complements to the platform. We chose to study software development hackathons, where technology platforms promote themselves to software developers on a regular basis. Hackathons attract thousands of software developers who share ideas, exchange technical know-how, and focus intensively on creating software. By the end of a hackathon, many attending developers will have built and executed an early version of a new piece of software, and some will have received prizes that recognize their innovations. A software platform business can sponsor these hackathons, providing financial, in-kind, and in-person logistical support to attendees. This sponsorship provides a way for technology companies to educate and encourage developers to adopt their platform.

Our research, which is published in the Strategic Management Journal, supports the idea that sponsoring temporary gatherings helps platform owners seed the spread of a new platform. We undertook a large-scale quantitative study using three years of data from DevPost, a public clearinghouse for information about hackathons around the world. We measured platform adoptions by hackathon participants over time using a novel approach that analyzes the code that software developers post publicly in GitHub, an online repository in which developers upload code for ongoing projects.

We found that hackathons are particularly well suited to spreading platform technologies. Developers often do not have good information about the costs and benefits of joining a particular platform. The social nature of a hackathon can solve a number of problems for developers: helping them overcome the initial obstacle of learning to use a new platform, helping them understand the platform’s use cases, and—perhaps most important—allowing developers to gauge the popularity of a new platform.

The collaborative nature of hackathons allows developers to gather information about whether and how to use a platform by observing and teaching one other. We observed that when developers at the hackathon had used the platform in the past, other developers were more likely to adopt that same platform. At these temporary gatherings, platforms are spreading by word of mouth through informal, face to face interactions between developers, a process sometimes referred to as social learning. Furthermore, we find that software developers pay close attention to prize-winning projects — so if there’s a platform that underlies a project that wins a competition, the prize helps draw attention towards that platform.

But over and above the peer-to-peer learning, we find that temporary gatherings also help align the expectations of attendees over which platforms are becoming fashionable. We refer to this as social coordination. Software developers prefer to adopt widely-used platforms because of network effects, and attendees at a temporary gathering can recognize when a bandwagon is emerging around a new technology and then choose to join it. These events also allow developer sentiment towards a platform to converge. Thus, when executed correctly, sponsorship of temporary gatherings can be a catalyst for technology platform companies to generate positive buzz about a platform’s prospects and accelerate a platform’s growth. 

For a firm or an entrepreneur who is launching a new platform, a central challenge—referred to as the chicken-or-egg dilemma—is how to get an initial set of users or complementors to join the platform in the first place. The Twitter anecdote suggests that perhaps one way to do this could be to sponsor a temporary gathering and use the concentrated mass of attention to get on peoples’ radars. But the Fyre Festival teaches us an important caveat: the sentiment that emerges at a temporary gathering is not always positive! Fortunately, we think that most managers can do better than the Fyre Festival. We anticipate that going forward more savvy entrepreneurs will adeptly use temporary gatherings to help new platforms achieve critical mass, perhaps helping challenge some of the entrenched players that currently dominate the digital space.

This blog is based on David, Tommy, and Andy’s research published in the Strategic Management Journal and is included in the platformpapers reference dashboard.

Fang, T. P., Wu, A., & Clough, D. R. (2021). Platform diffusion at temporary gatherings: Social coordination and ecosystem emergence. Strategic Management Journal, 42(2), 233-272.

Five Platform Competition Trends to Watch in 2022

What the academic research can tell us about platforms in 2022

Many platform companies (e.g., Amazon, Meta, Apple, and Google) are thriving and so is the academic research on platform competition. According to platformpapers, there are now 460 research articles published on platform competition across the fields of economics, marketing, management, and information systems. Notably, 60 of these articles were published in 2021. These research studies aim to better understand how firms such as Amazon, Kickstarter, Apple, Uber, Taobao, and Nintendo, as well as many others, compete and manage their ecosystems.

With recent developments in many platform-related areas—regulatory pressures to curb platforms’ dominance, the metaverse, blockchain technologies, platforms making record-breaking acquisitions, just to name a few—2022 is shaping up to be an interesting year for platform competition … and for the researchers trying to make sense of it all. Drawing on some of the latest—and greatest—academic research on platform competition, below I identify five major trends to watch in 2022.

1. The ongoing push for dominance … and regulation

We are living in a ‘platform economy’ and the modus operandi of firms operating in it can be best described as ‘platform capitalism.’ Many of the world’s most valuable firms measured by market capitalization operate platform business models. And from the looks of it, these platforms will get bigger before they get smaller. Whether it’s Amazon expanding its logistics network, Microsoft buying games publisher Activision Blizzard, or Facebook rebranding into Meta and making an aggressive push for early leadership in the metaverse, dominance is the name of the game. From the firm’s perspective there are clear benefits to market dominance (also see 4. Network effects, but not like you know them), but dominance also attracts scrutiny from antitrust agencies. For these platforms, it’s not so much a question of if, but rather when (and how) they will get regulated.

Recent economic theory has argued that acquisitions on one side of a platform (e.g., Facebook buying WhatsApp and Instagram) can create value for users on the other side of a platform (e.g., Facebook’s end users). Empirical research on platforms providing pet-sitting services adds nuance by arguing that value creation is attenuated when merging platforms are sufficiently differentiated and when users have heterogeneous preferences. One alternative to government intervention through regulation is self-regulation. Research on the sharing economy finds that a reduction in Airbnb listings following platform self-regulations led to a reduction in crime (i.e., assault, robbery, and burglary) in affected areas. Platform self-regulation either at the firm level or through the formation of industry-wide coalitions (e.g., the video game industry’s Entertainment Software Rating Board) may yield strong results when paired with credible threats of government regulation.

2. Platforms’ increasingly visible hand of curation

The days of platforms plainly facilitating a marketplace where buyers and sellers can transact are long gone. Not only is the supply of content, apps, and other products on successful platforms ever-increasing (there are now more than 2.2 million apps available on the iOS App Store), so is the importance of these markets to platform companies’ bottom line. For example, Apple’s earnings from apps in 2019 has been estimated at $15-18.3 billion. The share of revenues from apps relative to Apple’s overall earnings is also growing, given that hardware sales are slowing down due to saturation. More so than ever, platforms are trying to steer consumers in their selection of products, as the number of options can be overwhelming and platforms often have skin in the game.

Selective promotions of complements including apps, songs, and other products, can be a powerful tool for platforms to shape the overall value of their ecosystems. Selective promotions can take on many different forms, including Spotify’s curated playlists, Google’s Play Awards, and Kiva’s Social Performance Badges. Through such selective promotions, platforms can exercise their power by highlighting products or product categories that showcase the platform’s distinctive features or where the platform benefits disproportionately, for example, because it has favorable contractual terms in place or because the platform is itself a seller of products. The research has shown that platforms are indeed biased in their recommendation of products, and that selective promotions can influence the type and number of products launching onto the platform in subsequent periods.

3. Complementors strike back

In response to platforms’ tightening grip, complementors—the firms and individuals that rely on platforms for selling their products—are fighting back. Power dynamics between platforms and complementors are typically lopsided. Markets dominated by large platforms offer few alternatives for complementors, and complementors often are small entrepreneurs that depend on platforms for their businesses. Recently, however, complementors have started to band together to increase their bargaining power. One example is the Coalition for App Fairness, which has various well-known companies as members, including Epic Games, Match Group, and Spotify. Each of these companies individually have brought lawsuits against Apple, demanding better terms on the iOS App Store. Both the European Union and the Federal Trade Commission have started investigations into platforms’ conduct towards complementors, alleging that platforms are abusing their power.

Two common strategies complementors use to reduce their dependence on platforms include disintermediation and competing at the platform level. In settings where complementors repeatedly interact with the same customers, such as freelance marketplaces and sharing economy platforms, complementors can avoid paying the platform fees by conducting their business off the platform. Especially complementors that have a strong reputation may decide to disintermediate. Another strategy to reduce an existing platform’s power is for complementors to build their own platforms. Epic Games is pursuing this strategy with its Epic Games Store and so is Nike with SNKRS. While such a strategy requires significant resources and upfront investments, it may pay off in the long run.

4. Network effects, but not like you know them

Without buyers and sellers, many platforms are just an empty shell. Early-stage platforms face a ‘chicken-and-egg’ problem, or what has recently been coined the ‘cold start’ problem. Once a platform succeeds in attracting users at scale, however, this often triggers a self-reinforcing dynamic with even more users joining. A large part of any platform’s value proposition is captured by its user base, which can make it extremely difficult for new platforms to compete with a dominant platform in the presence of network effects. That said, network effects are no magic bullet. Some platforms with large user bases are struggling to defend their market positions and to make profits because network effects are local rather than global (Uber, anyone?), others are finding that network effects do not carry over from one period to the next, and the role of AI seems ambiguous yet important.

Research in the video games industry found that freemium games can generate strong network effects by incorporating social features such as online multiplayer modes. Other research found that gaming platforms can reduce their reliance on network effects by including standalone features such as PlayStation’s DVD player. The success of these strategies depends on external factors such as the size of the overall market. Research in the bike-sharing industry surprisingly found that the entry of a second platform competitor leads to an expansion of the overall market, therefore benefitting the incumbent platform. Even other research has argued that a firm’s accumulation of user-generated data can result in strong ‘data network effects’ through machine learning and artificial intelligence.

5. Decentralized platforms stake their claim

Blockchain technologies and the associated cryptocurrencies are increasingly entering the domain of traditional platform markets. Axie Infinity introduced the ‘play-to-earn’ business model to the video games industry and it showcases how publishers can use blockchain technology to facilitate transferability of virtual items across games and into the metaverse. Online sneaker and streetwear resell platform StockX will soon allow consumers to invest in Vault NFTs, non-fungible tokens that are tied to physical products traded on, and held by, the platform. In both cases, the blockchain is making these platforms more decentralized and, arguably, more democratic. Given the scrutiny platforms are facing, allegations about anticompetitive behavior, and complementors’ discontent over these issues, could this spell the end of the centralized governance model as we know it?

Academic research on blockchain-based platform business models is still scant. On average, the central role of the platform company does seem to diminish in the context of blockchain platforms. Whether a more centralized or decentralized governance mode is best for a platform’s success likely will depend on various factors, including the benefits conferred by reduced user opportunism and uncertainty, versus costs related to coordination and complexity. Conceptually, the pros and cons of a decentralized governance mode facilitated by the blockchain appear to map on to the concept of platform openness: Platforms that are more open tend to grow more quickly and garner the support of different types of complementors, but they also struggle to provide direction and capture value. Unsurprisingly, perhaps, the optimal level of (de-)centralization is somewhere in the middle.

In the coming months, I will invite authors from these and other studies to contribute to the blog by reflecting on their research and placing it into a broader economic and societal context.

Stay tuned!