Same Old Song with a Different Melody: The Paradox of Market Reach and Financial Performance on Digital Platforms
Year: 2021
Type: article
Abstract: In the service sector, digital platforms now enable service providers to reach customers through an online marketplace and use the value‐adding complementary services offered. However, despite the widespread prevalence of digital platforms, there has been little research on the market reach and financial performance captured by service providers. We explored these service provider‐specific outcomes of digital platforms by studying a digital platform in the beauty industry. Our results show that digital platforms present a troubling paradox for service providers participating in a platform‐based online marketplace: despite increases in market reach, in terms of a higher rate of new customer acquisition, those service providers participating in the marketplace have lower sales than others. However, the ‘dark side’ of this paradox is compensated by higher sales for service providers using more of the complementary services offered by the platform. Hence, although digital platforms may open new markets and add value, service providers should be wary of their paradoxical consequences. With these findings, we contribute new theoretical and managerial insight about the service provider‐specific outcomes of digital platforms and add to the ongoing debate about firm strategies in the digital age concerning the platform economy.
Source: Journal of Management Studies
DOI: 10.1111/joms.12701
Authors: Mikko Hänninen, Anssi Smedlund
Institutions: University of Nottingham, Aalto University
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,300
OpenAlex ID: W3133670878