Monday, January 30, 2023
The Digital Economy and the Growth Dynamics of Sharing Platforms: A Transaction Cost Economics Assessment
Despite their growing salience in the digital economy, several sharing platforms struggle to achieve sufficient scale, while others fail entirely. By extending the focus beyond network effects and trust-building mechanisms, this paper seeks to identify factors that impact platform growth and to analyse their implications for governance mechanisms and strategic management of sharing platforms. We center our analysis on transaction costs economics (TCE) and its three key related variables: transaction frequency, transaction uncertainty, and transaction-dedicated investments. Our aim is to examine how do these variables determine transaction costs at the platform level, and how these costs shape member participation and hence platform growth. To explore our hypotheses, we carried out a survey among the community of members of a digital, peer-to-peer (P2P), sharing platform. Our empirical findings confirm that a platform's growth is significantly affected by transaction features and that, alongside other theoretical approaches, TCE represents an appropriate and complementary lens with which to explore growth dynamics of sharing platforms, as well as to consider appropriate actions platform owners can take at the organisational, governance and strategic design levels.