An Investigation of Multisided Digital Platform Boundaries
Multisided digital platforms (MSDPs) are software systems that attract at least two distinct groups of users and generate network effects. They have attracted the attention of scholars and practitioners in recent years, as they have disrupted how firms create and capture value and have blurred their boundaries. Firms implementing MSDPs may make different boundary decisions when configuring the complements of their MSDPs. In some cases, they build complements in-house, while in others, they rely on third-party complementors. Despite efforts to understand the complex phenomenon of MSDPs, there is still confusion about what they are, and little is known about the determinant of their boundaries. This study aimed to provide a clear definition of MSDPs and investigated the factors influencing their boundaries as well as how firms respond to these factors. To answer these questions, first, this thesis synthesised a definition of MSDPs by integrating various streams of literature. Based on this, MSDPs have been defined as an organising logic characterised by a layered modular architecture and satisfying three conditions: (1) multisidedness, (2) modularity and (3) codebase extension. Second, this thesis implemented a qualitative case study of Uber, a ridesharing MSDP that disrupted the taxi industry worldwide, to understand the factors influencing MSDP’s boundaries. An in-depth analysis of Uber’s boundary decisions regarding its payment and maps complements was conducted. This showed that supply side factors identified in the literature, such as the need to reduce transactional hazards and build core competencies, influenced MSDP boundary decisions. In addition, demand side factors that have not been considered by previous research influenced firm boundaries. These demand side factors were complement localisation (adapting to local market conditions), customer heterogeneity realisation (addressing customers’ heterogenous needs and preferences) and supermodular complementarity ignition (increasing user numbers and investment in the MSDP). The findings suggested that an MSDP firm is more likely to rely on third-party complementors to respond to demand side factors, even though this may increase transactions costs. An exception to this is when a third-party complementary asset cannot be customised to meet the requirements of the MSDP. In these cases, an MSDP is more likely to build a complement in-house. These findings have offered new insights into MSDP boundaries by shifting the focus of existing theories of firm boundaries from the supply side to the demand side and from value capture to value creation. These new theoretical findings have complemented existing theories of firm boundaries and enhanced our understanding of MSDP boundaries. Moreover, these findings have important theoretical and practical implications, such as the need for future research to better understand demand side factors and for managers to evaluate the tension between supply side and demand side factors strategically.
Digital platform, Demand-side strategy, Firm boundaries, Value creation, Multisided market
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