The Platform Economy Matures: Pervasive Power, Private Regulation, and Dependent Entrepreneurs

Platforms are an emblem and embodiment of the digital era just as factories were of the industrial revolution. Digital platforms, through their power in their respective ecosystems, are intermediating and contributing to the reorganization of ever-greater segments of the economy and society. As this occurs, existing firms, jobs, and labor relationships are being displaced or transformed, even while new tasks and enterprises are emerging, and existing firms are adjusting.

This paper explores the ways in which platform firms are insinuating themselves into ever more parts of the economy. These platforms are integrating existing firms and service providers ever more tightly into their orbit. Existing firms, paradoxically, benefiting from and challenged by platform firms, are facing difficult adjustments to their role and power in their respective value chains.

The specific impact of platforms in particular cases is evident. Assessing the impact of the rise of the platform economy on the broader economy is more difficult, despite the acknowledged increase in amount of commerce conducted through or affected by platforms. To measure the sheer breadth of the economic activity affected by platforms, it is necessary to consider the diversity of platforms throughout the economy, the size, as well as the power of the ecosystems controlled by dominant platforms. The expansion of the scale and scope of platforms has implications for inter-firm competition and for which firms capture the value generated by economic activity. To that end, we illustrate the extent to which platforms are intermediating a large share of economic relationships across the economy. We present a framework for understanding of the impact of digital platforms on society and provide evidence of the power that platforms possess. To provide a granular analysis of the vectors of the expansion of platform power, we use a case study of Amazon to demonstrate the ways in which it affects a wide variety of industries.

We argue that platforms are private regulatory structures for those connecting or transacting through a platform. Such structures constitute a web of private regulation that organizes and shapes economic activity with little or no public oversight. The enormous reach of these platforms and their “regulator-like” power within their ecosystems compel us to consider whether private platform regulators are replacing many of the state’s functions.

Kenney, Martin and Bearson, Dafna and Zysman, John, The Platform Economy Matures: Pervasive Power, Private Regulation, and Dependent Entrepreneurs.

Metadata

  • United States
  • 2019
  • Research publication
  • competition, platform characteristics
  • English
  • Berkely University of California
  • Qualitative research, Quantitative research
  • Open access
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