In a technology-driven, digital world, many of the largest and most successful businesses now operate as ‘platforms’. Such frms leverage networked technologies to facilitate economic exchange, transfer information, connect people, and make predictions. Platform companies are already disrupting multiple industries, including retail, hotels, taxis, and others, and are aggressively moving into new sectors, such as fnancial services. This paper examines the distinctive features of this new business model and its implications for regulation, notably corporate governance. In particular, the paper suggests that a tension exists between the incentives created by modern corporate governance and the business needs of today’s platforms. The current regulatory framework promotes an unhealthy ‘corporate’ attitude that is failing platforms, and a new direction (what we term ‘platform governance’) is urgently required. In identifying this new regulatory direction, the paper considers how frms might develop as successful platforms. Although there is no ‘one-size-fts-all’ solution, the paper describes three interconnected strategies: (1) leveraging current and near-future digital technologies to create more ‘community-driven’ forms of organization; (2) building an ‘open and accessible platform culture’; and (3) facilitating the creation, curation, and consumption of meaningful ‘content’. The paper concludes that jurisdictions that are the most successful in designing a new ‘platform governance’ based on the promotion of these strategies will be the primary benefciaries of the digital transformation.
In a technology-driven, ‘digital world’, many of the largest and most successful businesses now operate and organize as open and inclusive ‘platforms’.1 Most platforms leverage networked technologies to facilitate economic exchange, transfer information and connect people.2 Think Amazon, Apple, Facebook, or Alphabet (Google).3 These companies all facilitate interactions between creators and extractors of value and, in doing so, generate wealth for the platform owner-controller.4 Thus, a platform derives value from its role as intermediary.5 But platform companies do more than merely utilize new technologies to facilitate economic or social interactions between interested third parties. These companies also organize their internal operations in a fatter and more inclusive way to enable collaboration among multiple stakeholders.6 By doing so, they maximize opportunities to deliver constant innovation in platform services and functionality. It is this combination of features (which we term, respectively, ‘transaction facilitators’ and ‘organizing-for-innovation’) that distinguishes platform companies from more traditional business organizations. To develop a more historical account of the distinctive features of this ‘platform-style’ business, we contrast these organizations with the centralized, hierarchical organizational forms that dominated in an earlier phase of industrial capitalism.7 Some suggest that we are living in a ‘platform age’ and that all frms—not just technology frms—should consider operating and organizing as a platform.8 If they do not, they will be disrupted by existing platforms that will continue their aggressive expansion into new sectors and markets.9 In this paper, we develop a conceptual framework for analyzing the governance of platform companies. Traditionally, corporate governance has emphasized the ‘primacy’ of shareholders—i.e., the economic, legal and moral owners of a company. Over time, policymakers have imposed measures on frms designed to compel the other actors within a company—mainly directors, executives, and managers—to act in the best interests of the shareholder-owners. Corporate governance measures were intended to protect the interests and control of those at the ‘top’ of the hierarchy (i.e., shareholders), and other considerations were of secondary importance. Moreover, the discourse and practice of corporate governance was an adaptation to—and a product of—a world of centralized, hierarchical organizations, primarily large corporations. This governance approach worked best when large corporations were the primary engines of economic growth, but it makes much less sense in an age of fatter, innovation-driven platforms.