Do negative externalities affect platform membership conditions? The impact of moral and regulatory legitimacy on platform governance

Do negative externalities affect platform membership conditions? The impact of moral and regulatory legitimacy on platform governance

Brandwijk, N. (Student TU Delft)
de Reuver, Mark (TU Delft Information and Communication Technology)

2023

When allowing third parties to join their platforms, platform owners run the risk of attracting harmful third-party complements. Existing literature considers that low-quality offerings negatively affect cross-side user satisfaction and attractiveness, ultimately harming the platform's reputation and stability. However, recent events show that negative externalities from third-party offerings can also motivate platform sponsors to adapt their membership conditions. Existing platform literature does not explain the underlying theoretical mechanisms. In this paper, we examine why platform sponsors adjust the conditions that govern third parties joining their platforms in response to negative externalities. We apply legitimacy theory to a critical case on a payment transaction platform. We find that negative externalities affect both moral and regulatory legitimacy, which in turn motivate the platform sponsor to adjust the conditions under which third parties may join the platform.

digital platform
platform openness
platform governance
legitimacy
negative externalities
ecosystem membership

http://resolver.tudelft.nl/uuid:0bbfcc61-0d20-449b-a227-60e4a0252654

AIS

Proceedings of the 31st European Conference on Information Systems (ECIS 2023)

European Conference on Information Systems 2023, 2023-06-11 → 2023-06-16, Kristiansand, Norway

Institutional Repository

conference paper

© 2023 N. Brandwijk, Mark de Reuver