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Journal of International Entrepreneurship

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15-05-2023

The increasing prevalence of multi-sided online platforms and their influence on international entrepreneurship: The rapid transformation of entrepreneurial digital ecosystems

Author: Hamid Etemad

Published in: Journal of International Entrepreneurship | Issue 1/2023

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Abstract

A set of diverse, evolving, and interactive forces are strengthening trends toward the digitization of firms business models and operations at a relatively fast pace and are affecting firms’ operations at relatively micro levels. They are also changing the ecosystems at the macro level through rapid digitization, augmented by the forces of change in the environment, including the progressive developments in communication and information technology and the rapid development of artificial intelligence (AI), www3.0, and I 4.0 amongst others. A review of the change and the evolutionary trends in the past 2 decades is highlighted to enable a discussion and characterization of the rapidly dominating digital ecosystems and their impacts on firms, especially iSMEs. This article examines the entrepreneurial digital ecosystem (EDE) to bring it within our theoretical and iSMEs’ easy operational reach with a few brief case-study examples of multi-sided online platforms and their increasingly disruptive impacts so far. Four schematic presentations portray the involved processes and are presented in Figs 1, 2, 3a and 3b; a comparative analysis of the top online multi-sided platform is presented in Table 1. They are operating within the macro entrepreneurial digital ecosystem, while modifying their own micro dimensions to their advantage and affecting the macro EDE. For ease of adoption and operationalization, the principal operating characteristics of a typical macro entrepreneurial digital ecosystem, each representing a distinct strategic function, are identified and re-articulated for SMEs’ and internationalized SMEs’ (iSMEs) ease of access and use for building their own corresponding micro EDE operations in order to exploit its advantages and avoid its emerging potential hazards.

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OECD has defined SMEs as enterprises with less than 250 employees in most advanced countries.

For more information, see Mason, C and Hruskova, M (2021), the impact of Covid-19 on entrepreneurial ecosystems, Economics 2021, pp 59-72, https://doi.org/10.4337/9781800374607.00011, Accessed on February 28, 2023.

In the aftermath of the 2007–2008 global financial crisis and the 2008–2009 recession, many new start-ups flourished and internationalized rapidly, including for example, WhatsApp, Lyft, Airbnb, Uber, Waymo, Pinterest, Credit Karma, and Git Hub, most of which grow and are global success.

The COVID-19 prolonged lockdowns forced substantial and substantive change in buyer- and supplier behaviours requiring a remedial response, at time immediately to avoid demise.

The Original source of US figures were US Small Business Administration and were accessed through www.oberlo.com at: https://www.oberlo.com/statistics/number-of-small-business-in-the-us (Accessed in April 2023 and May 8,2023)

Source for the EU figures is: https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ddn-20200514-1

Terminology used by Van de Ven (1993) suggesting that nascent entrepreneurship would highly depends on an “infrastructure” that was later called “ecosystems, by, for example, Bahrami and Evans (1995).

The emerging more popular terminology of “ecosystems”, barrowed from biology, and initially applied to a specific support system for start-up enterprises and evolved to referring to the support provided by the entire embedding environment. Accordingly, we use both terminologies interchangeably.

Van De Ven, AH, (1993), The development of an infrastructure for entrepreneurship, Journal of Business Venturing, Volume 8, Issue 3, May 1993, Pages 211–230,

https://doi.org/10.1016/0883-9026(93)90028-4

Bahrami, H and Evens, S (1995), Flexible Re-cycling and High-Technology Entrepreneurship, California management Review, V37, No 3, P.62–88.

The ecosystem support may include the contributions of incubators, accelerators, venture capitalist, supporters and mentors to enable a nascent enterprise to travel through IPO and eventual internationalization.

Although we aspire to address and explore the adverse impact of the above questions in this article, some may form the agenda for other complementary discussion later-on.

Climatic occurrences, such as cyclones, hurricanes, heavy rains, floods, mudslides, etc., could be massively damaging, but their sever impacts extend beyond local and regional areas (e.g., Cyclone Gabrielle hit New Zealand’s North Island in February 2023 and caused massive damages and more than 10 deaths).

For example, shortages of drinking and irrigation water reduce food production in a region with serious adverse effects reaching beyond localities and extending to broader regions. Similarly, in the free trading areas, such as the North American FTA, and the European Union, more macro changes could eventually impact many after some time.

It is noteworthy that different entities may view and attribute an impact to a highly micro (e.g., specific aspects of supply and value chain affecting local competition in a specific industry) when they are prepared or capable of controlling the causal forces. However, highly complex macro systems (e.g., global financial crisis of 2007-2008) and somewhere in between at the meso level (e.g., Competition in free trading area, such as the European Union) are beyond the control of smaller entities.

Bahrami and Evens (1995) was a detailed qualitative research of the California’s “Silicon Valley” Ecosystem. The context of their definitions was early 1990s entrepreneurial developments in “Silicon Valley”. Bahrami, H and Evens, S (1995), Flexible Re-cycling and High-Technology Entrepreneurship, California management Review, V37, No 3, P.62–88.

Industry 4.0 (I 4.0) refers to the highly advanced and evolving ways by which companies manufacture, improve upon, and distribute their products. Manufacturers are integrating new technologies, including Internet of Things (IoT), cloud computing and analytics, and Artificial Intelligence (AI) and machine learning into their production facilities and throughout their operations (modified content of the original definition by Google.com).

Google.com defines a www 2.0 website as a copy of the original www website hosted on another server. Overloading traffic can be redirected to www 2.0, www 3.0, or even the www 4.0 in case the original site is overloaded or experiencing temporary maintenance works. Such network of websites have facilitated communications and reduced both the limitations of document size and speed of transmissions.

Even a casual observation of the multi-sided digital platforms online offerings indicate that they offer massive number of choices on their websites for every one’s information, decision, and possible purchase, regardless of one’s location. The information regarding location is added for delivery and logistics at a later stage after the purchase decision.

Source: Statista https://www.statista.com/statistics/242235/number-of-ebays-total-active-users/

Source: https://therideshareguy.com/how-many-uber-drivers-are-there/

Such autonomous Agents are generally called “autonomous complementors” (Hein et al 2020, p. 87) and not a part of the firm.

For example, consumers, or renters, looking for specific temporary or short-term rental accommodations are nearly matched with properties offering the desired or better characteristics and both are informed of the upcoming potential transaction.

It is note worthy that both Air B&B and Uber have created some value-creation processes of their own to fill-in potential gaps.

In a sense, Air B&B and Uber resemble the Classic Auctioneers in Walrasian Austrian economics.

Facebook Chief Product Officer Chris Cox is quoted: “Thirteen years after launching and less than five years after hitting one billion, Facebook now has two billion monthly active users”.

https://techcrunch.com/2017/06/27/facebook-2-billion-users/ Accessed on December 2022.

Spotify started-up in 2006 in Stockholm, Sweden. It offers 100 million songs and five million podcasts. It generated €11.72 billion revenue in 2022. Source: https://www.businessofapps.com/data/spotify-statistics/

Amazon’s sale Revenues in 2019 (Pre COVID-19) exceeded 250 Billion US Dollars and more than doubled to 514 Billion US Dollars in 2022 (Source: https://www.statista.com/statistics/266288/annual-et-income-of-amazoncom/).

Consider, for example, Amazon’s monthly charge of about $10 raises $120 of capital from each prime member at no additional corresponding cost, which can finance substantive advances, or expansions, that further contribute to their scale and scope economies. Similarly, Cost Co’s innovative and entrepreneurial initiatives of charging more than $100 annual fee (which it returns fully to buyers when they buy more than $2000 annually) is a costless entrepreneurial initiative; and its bulk-buying create strategic flexibilities that traditional enterprises, such as Walmart, had not enjoyed before and find it difficult to impose them now. Jing Dong (JD.com) is also replicating Cost Co by buying in bulk to pass its saving through lower prices to its customers in China and elsewhere.

It must be noted that most of such micro, macro and subsystems are proprietary, and owned by the platform operators and continually updated to contribute to their overall efficiencies and effectiveness for increasing operational competitive advantages.

The principal difference between EDS and the traditional ecosystem is the entrepreneurial orientations (Miller 198X and REF, REF) and the strategic capabilities (Teece 2007) of the users that underlie and support both the principal digital enterprise, and possibly all complementors’ (Hein et al 2020) competitive operation(s), which in turn, advance the capabilities of EDS and further distinguish them from the traditional ecosystems.

A brief examination of Table 1 shows that the size of B2B transactions of online digital platform, such as Shopify.com, doubled in less than three years starting in early 2020 due to COVID-19 forces of change.

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The comparative analysis presented in table 1 is a part of an ongoing research, a part of which is found in Etemad (2022a, b, c and d).

The traditionally constraining local experiential knowledge (Johanson and Vahlne 1977) can be provided by local collaborative suppliers on their own way to become international small digital ventures – ISDVs (Etemad 2022a).

Many local taxi and transportation enterprises have emulated the Uber’s original business model that was based on the early version of the collaborative consumption (CC), which has been modified in different ride-sharing, car-sharing, and very short car-rentals based on, for example, annual memberships.

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Title: The increasing prevalence of multi-sided online platforms and their influence on international entrepreneurship: The rapid transformation of entrepreneurial digital ecosystems
Author: Hamid Etemad
Publication date: 15-05-2023
Publisher: Springer US
Published in: Journal of International Entrepreneurship / Issue 1/2023
Print ISSN: 1570-7385
Electronic ISSN: 1573-7349
DOI: https://doi.org/10.1007/s10843-023-00331-8

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Other articles of this Issue 1/2023

Subnational institutional configurations and international expansion of SMEs in emerging economies

The perils of acting rashly: Risk-taking propensity impeding emotion-based learning in entrepreneurs

Design-oriented policy interventions: The case of technology-based international entrepreneurship in emerging context

The sharing economy and collaborative consumption: Strategic issues and global entrepreneurial opportunities

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