Abstract
In this article, we introduce the global stakeholder capitalism model of digital platforms. We describe the role that big data plays in the formation of the new extended innovation ecosystems of digital platforms and explain how these extended innovation ecosystems give rise to this new model. We discuss the implications of this new model for the strategy of digital platforms from a Schumpeterian perspective and show how digital platforms profit from innovation by capturing a form of rents that differs from standard Schumpeterian rents rooted in innovation economics. We conclude that the sustainability of this model depends on a new form of governance that assumes multi-fiduciary corporate duties in the extended innovation ecosystems of digital platforms.
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The authors confirm that all the data sources supporting the findings of this study are referenced in this article and were publicly available at the time of submission.
Notes
Named after David Sarnoff, a pioneer of broadcasting networks in the U.S.
According to this law, the economic value of the network could grow to the square of the number of nodes (users) if all users in the network are equally valuable in terms of enabling interconnections (Briscoe et al. 2006).
Which in the case of the initial business model of Amazon corresponded to books.
According to which the economic value generated by these applications grows exponentially with the number of nodes (users) in the network (Reed 2001).
These cases, which are by far more common due to the myriad of ways in which big data can be monetized and the deep uncertainty associated with developing the necessary assets for such monetization, are best exemplified by the “Moonshots” and “Other Bets” entrepreneurial agendas driven as part of the new grand strategy of Google (Manjoo 2015),
The complete list is available at https://acquiredby.co/twitter-acquisitions.
Facebook seems to have learned this lesson the hard way as a result of the Cambridge Analytica scandal (see www.nytimes.com/2019/09/20/technology/facebook-data-privacy-suspension.html).
Such as Google’s cutting-edge AI technologies and the sheer amount of big data harvested by Google’s search engine marketing business.
A comprehensive report on the new grand strategy of Google can be accessed at: https://www.cbinsights.com/research/report/google-strategy-teardown/.
The rise of the online ad syndication market pioneered by Google at the turn of the millennium provided an early case of a digital platform harnessing the power of exponential network effects in group-forming networks to ignite a period of hyper growth. In the case of Google, this period gave rise to the search engine marketing industry as we know it today.
The most ambitious case of innovation ecosystem extension is the new grand strategy of Google under Alphabet (Manjoo 2015).
The acquisition of Instagram by Facebook is an example of this type of acquisitions.
The sudden rise in price of property rentals in the case of Airbnb is an example of unanticipated externalities arising in the extended innovation ecosystem of digital platforms.
The case of Twitter analyzed in Section 3 is a prototypical example of such integration process (https://www.vox.com/2015/4/11/11561360/twitter-cutting-ties-with-all-data-resellers-including-datasift).
These are valuable, rare, inimitable and nonsubstitutable resources.
See for example https://www.vox.com/2015/4/11/11561360/twitter-cutting-ties-with-all-data-resellers-including-datasift).
A recent example of these complex trade-offs is the current debate on how digital platforms should regulate fake news without limiting free speech.
Which corresponds to cell 5 in the original diagram 11 introduced in Teece (1986, p. 297).
This process is best exemplified by Twitter in its quest for a viable revenue model (Welch and Popper 2015).
As exemplified by Twitter’s governance of its innovation ecosystem (Ingram 2011).
An early case of this threat was delivered by YouTube as a highly successful application that piggybacked on MySpace (Rosenbush 2006).
That is, the different number and type of roles a stakeholder as an agent can play in these extended ecosystems.
The catch-up strategy executed by Google to position Android as the most widely used mobile operating system brilliantly exemplifies such coopeting strategies.
This is shown in Fig. 1 by the relationships of digital platforms with governments at various levels, including cities, provinces, nation-states, regions across nation-states, and governance bodies at supranational level (Lessig 2006). A prototypical case of this form of negotiation are the agreements between Airbnb and cities in Europe, in which bespoke taxation preempting the installation of norms banning Airbnb’s short rentals from large metropolitan areas was negotiated to preserve the business model of Airbnb (Nieuwland and van Malik 2020).
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Acknowledgements
The authors owe a debt of gratitude to the anonymous reviewers whose comments and suggestions greatly improved earlier versions of this article.
Funding
The European Union’s Seventh Framework Programme for Research, Technological Development and Demonstration funded this work under grant 321480.
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Paredes-Frigolett, H., Pyka, A. The global stakeholder capitalism model of digital platforms and its implications for strategy and innovation from a Schumpeterian perspective. J Evol Econ 32, 463–500 (2022). https://doi.org/10.1007/s00191-022-00760-z
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DOI: https://doi.org/10.1007/s00191-022-00760-z