Kick-off event: The DMC Forum initiative
The current regulatory debate on digital markets and the need to regulate digital platforms to contrast their market power and competition concerns is anchored in two fundamental beliefs: successful platforms are often protected from rivals’ entry by network effects in both users and data; platforms can leverage these network effects to expand their services (and network) to adjacent markets in a way that further blocks new entrants. The concern is that, as a result, platforms may develop business models and a market gatekeeping stronghold that are harmful or unfair to business and individual users.
Currently foreseen remedial interventions could be wide-ranging and include the imposition of interoperability obligations on the core service, restrictions in platform design or rules to avoid the ‘self-preferencing’ of own complementary products, mandated access to platform data by business users, or restrictions on off platform data usage and of data across platform products. These remedies are predicated on the view of digital platforms as the “new utilities” of the digital economy – i.e., digital infrastructures that need to guarantee equal access to and use of data and network resources. This view, which is often echoed by analysis in the economics literature, is somewhat at odds with research in the management literature conceiving of digital platforms as complex technology systems and ecosystems, which involve specific (rather than generic) complementarities and an active governance to steer the technology evolution and drive innovation and value creation.
This workshop will explore the implications of these views by discussing the following issues:
- To what extent platforms with a large network of users are protected from competition by the “passive” force of network effects, as implied in the “platforms as utilities” view invoked by policymakers?
- Are network effects on digital platform ecosystems of the same nature as those found in more traditional settings, such as for technological standards battles, whereby, the technology having predefined characteristics and functionalities, the market tends to pick a winner and tip? Or are we witnessing to more complex dynamics in user engagement?
- Can we talk about network effects in data? When do data-enabled learning effects translate into network effects? And what are the implications for platform users (benefits and harm)? What is the relative importance of any data efficiencies compared to that of other elements in a platform’s value propositions?
- There are complementarities that are specific to particular ecosystems – the way that participation and interactions are governed, and complementary products and services are developed and delivered through the platform, create a unique, distinctive consumption experience, and thus differentiation among platforms. In that context, can standardization and interconnection play a similar role in platform governance to the one it played in the telecommunications or other utilities space?
- Is a ‘plug and play’ model realistic, or desired, on digital platforms? What effects might such model produce on competition and innovation?
- How does the reality of ecosystems impact the way competition occurs on and for the market? Do ecosystems, which result from non-generic complementarities around platforms, stimulate greater innovation and competition, making the competitive domain more contestable or do they reinforce entry barriers?
- Does a combination of ‘size’ and ‘multimarket activity’ justify the imposition of business model restrictions? That is, shall we restrict ex ante these network and market expansion strategies on the fear of allowing platforms to gain too a big and strong position? The remedial actions considered have the potential to severely impact platforms’ business model; restricting these actions might undermine the platform’s ability to generate value¨to users.
- What would be valid value proposition for such interventions, if any?
- Is there a risk of value loss in the various remedial actions considered?
- What factors should be considered in order to avoid them?
After introductory remarks by Facebook, invited experts will present short interventions which will be commented by discussants. A short Q&A session will follow.
- Melissa Schilling, NYU
- Marshall van Alstyne, BU
- Tobias Kretschmer, LMU
- Andrei Hagiu, BU
- Carmelo Cennamo, CBS, Digital Markets Competition Forum director
The DMC Forum initiative
The Digital Markets Competition Forum is a new initiative to enhance the dissemination of Strategy and Innovation research, and its practical relevance in the context of the digital economy. Led by Professor (with special responsibilities) Carmelo Cennamo, the DMC Forum’s main objective is to foster a progressive debate on the role of digital platforms in the economy and the new competitive forces in digital markets. In particular, the DMC Forum aims to:
- bridge academic research and the practice of management in (and of) digital markets;
- promote the dissemination of management research on digital platforms, ecosystems and competition and innovation in digital markets;
- Reach out to policymakers, firms, and stakeholders at large to discuss the opportunities (for innovation and value creation) as well as the challenges associated with digital platforms and digital markets, including the implications for the regulatory framework.
Find more information on the webpage of the initiative