The Digital Platform Economy Index 2020

In one of the most interesting articles on the Information-Technology Revolution (ITR), Hobijn and Jovanovic (2001) argued that the arrival of the ITR in the 1970s created a need for new firms (Greenwood & Jovanovic, 1999). Technology breakthroughs favor the formation of new firms for three reasons: They provide awareness and skills, vintage capital, and vested interests. The stock market incumbents of the day were not ready to implement new digital technologies, thus it took new firms to bring the technology to market after the mid-1980s.The stock prices of incumbents fell immediately. New venture capital flowed to startups that built the new industries in the USA, but this did not occur in Europe (Gompers & Lerner, 2001). Between 1980 and 2020, the U.S. stock market increased 30-fold. The five most valuable public companies in the USA in 2020—Apple, Amazon, Microsoft, Facebook, and Google—are valued at or near $1 trillion each. Many of them are “matchmaker” businesses whose core competency is the ability to match one group of users with another by reducing transaction costs.

While ecosystem theories and concepts have a relatively long history with both entrepreneurial ecosystems (Acs et al., 2017) and digital ecosystems (Li et al., 2012; Weill & Woerner, 2015), the digital entrepreneurship ecosystem and a platform-based economy concepts have emerged only recently (Elia et al., 2020; Nambisan, 2017; Sahut et al., 2019). Moreover, measurements are lagging behind conceptual developments. Some argue that all ecosystems are exclusive, as each has its unique component structure, strengths, and weaknesses. Consequently, case studies are more appropriate than simple or composite indicators to describe the ecosystem phenomenon (Isenberg, 2010; Spigel, 2017). While we agree that the specifics of each ecosystem can be viewed up close, when looking from a certain distance, one can recognize the common structures and features (Szerb et al., 2019). Accurate measurements are vital for three reasons. First, solid policy recommendations should be based on appropriate measures. Second, one can recognize the relative development of a particular unit by comparing it to other units’ rankings and index scores. And third, an ecosystem’s strengths and weaknesses can be identified from a benchmarking perspective.

In this section, we provide a basic analysis of digital entrepreneurship, which we called the DPE Index, for 116 countries from all continents and in all development stages. The calculation steps of the DPE Index are found in Appendix B.

Facilitating digital and entrepreneurship ecosystems is high on many government policy agendas. Many nations focus on developing the digital infrastructure, maintaining digital freedom and privacy, protecting users from cybercrime and piracy, improving the population’s digital literacy, and supporting technology-related startups. However, enhancement of digital platform economies at the country level has been fragmented. Unfortunately, there is little understanding of how policies can foster this new type of economy most effectively. Some policies, such as the European Union Global Data Protection Regulation, have in fact had a negative effect on some information-sensitive business models (Hoofnagle et al., 2019). Those who want to regulate the digital platform ecosystem have to acknowledge that the most important platform companies are global and therefore call for global rather than local action. To highlight this, we report two interesting statistics.

The recent digital and information-technology revolution has had a major impact on entrepreneurship. Platform-based developments in particular have helped to drastically reduce transaction costs and increase the appearance of new business models. This Schumpeterian type of organizational innovation has given birth to trillion dollar businesses like Apple, Alphabet, Amazon, Microsoft, and Facebook. These platforms and others provide a fertile field for Kirznerian-style digital entrepreneurs. However, digital entrepreneurs require a different environmental context than non-digital ones. Even if a country builds out its digital ecosystem, there is no guarantee it will be implemented by existing firms. In the same vein, if a country builds out its entrepreneurial ecosystem, there is no guarantee that startups will introduce new technologies. For technology to be introduced successfully, the digital ecosystem and the entrepreneurial ecosystem must be developed simultaneously. The digital entrepreneurship ecosystem theory developed by Sussan and Acs (2017) and amended by Song (2019) integrates the entrepreneurship ecosystem and the digital ecosystem concepts.