Competitive Ecology of Digital Markets: Concentration, Diversified Growth, and Product Distinctiveness in the Platform Economy

Description

The rapid expansion of the digital platform economy disrupts traditional markets and facilitates resource utilization while reducing participation costs. As the digital market continues to grow, many platforms have witnessed the paradoxical trends of rising concentration and the proliferation of niche producers. Motivated by these paradoxical trends, our project investigates the concentration and competitive dynamics within the rapidly expanding platform economy. We aim to understand how platform concentration influences the growth opportunities and performance of peer participants. The investigation aligns with the ongoing “superstar” versus long tail debate in the information systems literature while offering a distinct ecological perspective to enhance our understanding of competitive strategies on platforms. Our objective is to develop an ecological argument that explains the impact of platform concentration on various producer types, with a focus on platform sustainable growth, product innovation, and market performance. We extend the resource partitioning theory (RPT) to the platform economy context to investigate the interrelation between the rising concentration of generalist producers and the growth and performance of varied producer types. Through an analysis of the concentration effects on producer outcomes, we propose that generalist producers capitalize on scale advantages to cater to mainstream customers, while specialists thrive in specific niches by providing products with unique or distinctive features. We then develop hypotheses that underscore the significance of resource partitioning in influencing platform growth, product distinctiveness, and the performance of varied producers in digital markets. The project comprises three studies. Study I examines how the concentration of professional hosts on Airbnb impacts the growth of niche suppliers in the sharing economy. Study II analyzes the influence of platform concentration on product distinctiveness, using crowdfunding campaign data from Kickstarter. Study III investigates the impact of the reversal of resource partitioning on gig workers’ performance during a geopolitical shock, leveraging a policy change on the Upwork platform in response to the Russian-Ukrainian war. Using a repertoire of computational and empirical strategies, these studies provide insights into the resource partitioning dynamics of the platform economy, shedding light on the relationships between platform concentration and the growth, performance, and product innovation of varied producers. The findings will have significant research and practical implications for platform sustainable development and competitive strategy.