Externalities and Complementarities in Platforms and Ecosystems: From Structural Solutions to Endogenous Failures

Abstract

Platforms and ecosystems provide structures for constellations of economic actors to engage and interact as they seek to create and capture value. We consider how the constructs of platforms and ecosystems relate and explore why they have become more ubiquitous by focusing on the nature of their value-add. We propose that they emerge as a response to distinct market failures, which we identify, and we explain which specific externalities they help overcome. We also identify post-hoc endogenous functional and distributional failures that platforms and ecosystems, in turn, generate. We discuss implications for theory and practice.

Keywords: ecosystem failures, externalities, digital, platforms, ecosystems, complementarities

JEL Classification: M21; L12; L22; L4