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Same Old Song with a Different Melody: The Paradox of Market Reach and Financial Performance on Digital Platforms

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  • Mikko Hänninen
  • Anssi Smedlund

Abstract

In the service sector, digital platforms now enable service providers to reach customers through an online marketplace and use the value‐adding complementary services offered. However, despite the widespread prevalence of digital platforms, there has been little research on the market reach and financial performance captured by service providers. We explored these service provider‐specific outcomes of digital platforms by studying a digital platform in the beauty industry. Our results show that digital platforms present a troubling paradox for service providers participating in a platform‐based online marketplace: despite increases in market reach, in terms of a higher rate of new customer acquisition, those service providers participating in the marketplace have lower sales than others. However, the ‘dark side’ of this paradox is compensated by higher sales for service providers using more of the complementary services offered by the platform. Hence, although digital platforms may open new markets and add value, service providers should be wary of their paradoxical consequences. With these findings, we contribute new theoretical and managerial insight about the service provider‐specific outcomes of digital platforms and add to the ongoing debate about firm strategies in the digital age concerning the platform economy.

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  • Mikko Hänninen & Anssi Smedlund, 2021. "Same Old Song with a Different Melody: The Paradox of Market Reach and Financial Performance on Digital Platforms," Journal of Management Studies, Wiley Blackwell, vol. 58(7), pages 1832-1868, November.
    • Handle: RePEc:bla:jomstd:v:58:y:2021:i:7:p:1832-1868
    DOI: 10.1111/joms.12701
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    2. Jan Frederic Nerbel & Markus Kreutzer, 2023. "Digital platform ecosystems in flux: From proprietary digital platforms to wide-spanning ecosystems," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-20, December.
    3. Wu, Aiqi & Song, Di & Liu, Yihui, 2022. "Platform synergy and innovation speed of SMEs: The roles of organizational design and regional environment," Journal of Business Research, Elsevier, vol. 149(C), pages 38-53.
    4. Markus Menz & Sven Kunisch & Julian Birkinshaw & David J. Collis & Nicolai J. Foss & Robert E. Hoskisson & John E. Prescott, 2021. "Corporate Strategy and the Theory of the Firm in the Digital Age," Journal of Management Studies, Wiley Blackwell, vol. 58(7), pages 1695-1720, November.
    5. Onetiu Daniel Darius & Madalina Dumitrita Maticiuc, 2022. "Digital Platforms – Integrate Part Of Company Performance," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 331-336, August.

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