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

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
Date
2021-11
Major/Subject
Mcode
Degree programme
Language
en
Pages
67
Series
Journal of Management Studies
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.
Description
Keywords
digital strategy, entrepreneurship, marketplace, platform, economy, service provider, services
Other note
Citation
Hänninen , M & Smedlund , A 2021 , ' Same Old Song with a Different Melody: The Paradox of Market Reach and Financial Performance on Digital Platforms ' , Journal of Management Studies , vol. 58 , no. 7 , pp. 1832-1868 . https://doi.org/10.1111/joms.12701