Two-faced governance in platform ecosystems

Strategy & Business Policy

Speaker: Annabelle Gawer

Professor - University of Surrey UK

Conference  Jouy-en-Josas - T015

Abstract:
The platform literature in economics and management claims that platform owners should
design and enforce ecosystem governance to satisfy all platform sides, that this governance
should be precisely defined, and that sustained governance infringement is bound to lead to
platform failure. Yet, despite anecdotal evidence to the contrary, there has yet been scant
empirical research exploring the extent to which platform owners may be deliberately engaging
in practices that are systemically inconsistent with their own declared governance rules and
whether the platform may actually benefit from these discrepancies. This article asks: Are
there sustained discrepancies between a platform owner’s declared ecosystem governance
and its actual practices? And what are the consequences of these discrepancies on the
platform owner and its ecosystem members? To answer this question, we studied how
Amazon governed its Marketplace between 2019 and 2022 and found evidence of what we
name “two-faced” platform governance. It is composed, on the one hand, of the platform firm’s
officially declared set of rules, roles, and activities and, on the other hand, of a set of practices
and “unwritten rules” of participation which depart from the official governance. We argue that
this two-faced platform governance creates unpredictability for complementors and enhances,
at least in the short term, the platform firm’s bargaining power over them. We also identify a
set of adaptive practices that ecosystem participants adopt and find that they, too, resort to
sets of declared and undeclared practices. We present a process model characterizing the
declared and undeclared practices and how they interact. We discuss our contributions to the
literature and implications for managers and regulators.