Platforms without borders? The international strategies of digital platform firms

• Author: Andreas P. J. Schotter,Maximilian Stallkamp
• Published date: 01 February 2021
• Date: 01 February 2021
• DOI: http://doi.org/10.1002/gsj.1336

SPECIAL ISSUE ARTICLE

Platforms without borders? The international

strategies of digital platform firms

Maximilian Stallkamp

1

| Andreas P. J. Schotter

2

1

Pamplin College of Business, Virginia Tech,

Blacksburg, Virginia

2

Ivey Business School, Western University,

London, Ontario, Canada

Correspondence

Maximilian Stallkamp, Pamplin College of

Business, Virginia Tech, 880 West Campus Drive,

Blacksburg, VA 24061.

Email: mstallkamp@vt.edu

Research Summary: Digitalization has enabled firms with

so-called platform business models to emerge in many

sectors of the economy. By facilitating transactions

between different groups of users (e.g., buyers and

sellers), platform firms are disrupting industries around

the world. However, little is known about the international

strategies of platform firms, as research has mostly exam-

ined platforms in single-country contexts. We address this

gap by integrating insights from platform research in strat-

egy and economics—specifically the notion of network

externalities—with internalization theory. We extend the

existing typology of network externalities by distinguish-

ing between within-country and cross-country network

externalities. We derive testable propositions regarding

the foreign entry modes of platform firms, their interna-

tional strategic posture (multidomestic vs. globally inte-

grated), as well as foreign market selection criteria and

market exit.

Managerial Summary: Many companies in the digital

economy operate platform business models, which create

value by connecting different groups of users, such as

buyers and sellers. We examine how network

externalities—the notion that a platform becomes more

valuable to each user as more users join—influence the

international expansion of these firms. We show that it is

important to consider the geographic scope of network

externalities, that is, whether network externalities operate

across national borders or whether platform firms have to

create separate user networks in each country. The distinc-

tion between within-country and cross-country network

externalities affects key internationalization decisions,

such as how to enter foreign markets, whether to pursue

multidomestic or global strategies, how to select foreign

markets, and when to exit from a foreign market.

Received: 28 April 2018 Revised: 27 October 2018 Accepted: 11 December 2018

DOI: 10.1002/gsj.1336

58 © 2019 Strategic Management Society wileyonlinelibrary.com/journal/gsj Global Strategy Journal. 2021;11:58–80.

KEYWORDS

digital economy, firm-specific advantage, multisided

business models, network effects, platforms

1|INTRODUCTION

As digital information and communication technologies transform the economy (Alcácer, Cantwell, &

Piscitello, 2016; Coviello, Kano, & Liesch, 2017; Yoo, Boland, Lyytinen, & Majchrzak, 2012), a

growing number of companies operate so-called platform business models (D. S. Evans & Schmalen-

see, 2016; Van Alstyne, Parker, & Choudary, 2016). Platforms generate value by facilitating transac-

tions between different groups of users, such as buyers and sellers (Eisenmann, Parker, & Van

Alstyne, 2006). Although platforms (sometimes called multisided markets

1

) are not an entirely new

phenomenon, they play a central role in an increasingly digitalized economy (D. S. Evans & Schma-

lensee, 2016; Teece, 2017). The widespread adoption of the internet and connected mobile devices

has enabled firms to introduce platform business models in a much wider range of industries, often

“disrupting”established industry structures (Hagiu, 2009; Van Alstyne et al., 2016). Examples

include transportation (e.g., Uber), meal delivery (e.g., Just Eat), lodging (e.g., Airbnb), and out-

sourced business services (e.g., Upwork). A recent report identified 176 platform firms

2

with valua-

tions exceeding $1 billion, two-thirds of which were headquartered outside of the United States

(P. C. Evans & Gawer, 2016).

Research on platforms originated in economics and has been flourishing in the strategy field since

the early 2000s (for a recent review, see McIntyre & Srinivasan, 2017). Platforms have also become

a major topic in information systems (IS) research (e.g., Agarwal, Gupta, & Kraut, 2008; Constanti-

nides, Henfridsson, & Parker, 2018). Existing research has emphasized the role of network externali-

ties (often simply referred to as “network effects”), which increase the value of a platform to each

user when more users join it (Katz & Shapiro, 1985). Network externalities are crucial to understand-

ing the strategies and performance outcomes of platform firms (Caillaud & Jullien, 2003; Cennamo &

Santalo, 2013; Eisenmann, Parker, & Van Alstyne, 2011; Rochet & Tirole, 2003). However, this lit-

erature has generally disregarded national borders, implicitly assuming that platform firms operate in

a single, homogeneous market (J. Lee, Song, & Yang, 2016). Surprisingly, international business

(IB) scholars have only very recently begun to examine the platform phenomenon (Brouthers, Geis-

ser, & Rothlauf, 2016; Chen, Shaheer, Yi, & Li, 2018; Ojala, Evers, & Rialp, 2018; Parente, Gelei-

late, & Rong, 2018). Due to the nascent state of IB research on this topic, our theoretical

understanding of platform internationalization—and the role played by network externalities—

remains underdeveloped.

Network externalities can provide a competitive advantage to platforms with large user networks,

often allowing them to gain dominant market shares (Eisenmann et al., 2011; Shapiro & Varian,

1

Different terminologies have been used to discuss platforms, reflecting different disciplinary conventions (see Appendix).

2

The term “platform firm”refers to the companies that own/operate platforms. For example, Apple owns the iPhone/iOS platform.

Although some platforms are controlled by diversified firms which combine multiple platforms and non-platform businesses

(e.g., Apple, Amazon, Alibaba), for the sake of theoretical clarity we focus on pure platform firms and the platform-based business

units of diversified firms.

STALLKAMP AND SCHOTTER 59