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We have entered a new phase of business dominated by digital platforms, i.e. platforms that have a modular architecture and provide interface that facilitates multilateral transactions and exchanges among users and providers of complementary products and services (i.e., complementors). This platform-centric ecosystem allows enterprise to exploit ecosystem-specific advantages (ESAs) which are very different from firm-specific advantages generated under multinational-enterprise model. This study, thus, considers the applicability of extant international business (IB) scholarship to such digital platforms to unlock the unlimited potential.

This study first draws insights from current digitization literature contrasting the governance of network multinationals with that of platform-centric ecosystems. Unlike general multinational enterprises (MNEs) which expansion is driven by internationalization theory, platform firms follow an externalization logic and hinges on the bundling of external, complementary assets owned and controlled by autonomous complementors. Also, a primary motivation for organizing as a platform is to leverage the generative potential of distributed innovators while at the same time benefiting from economics of co-specialization. These suggest that, to account for externalization and positive externalities associated with digital platforms, IB theories need to examine the bundling of co-specialized resources and the value co-creation resulting from such bundling.

In terms of operation, platform-based networks require a new way of thinking, as they differ from conventional inter-firm networks significantly. While the goal of MNEs is to minimize its bounded rationality and partner bounded reliability without necessarily requiring ownership, that of platform governance may not be circumscribing the conduct of complementors, but incentivizing those loosely coupled ecosystem partners. Therefore, there is a need to enhance system-level coordination of co-specialized partners beyond the scope of their organizations, beyond the traditional boundary of their industries, and beyond the borders of their home nations.

In this regard, such platform organization structures may be described as an “ecosystem” which is governed by cooperative relationships. The internationalization of platform ecosystems is predicated on relationship-specific investments made by loosely coupled participants; some may join the ecosystem from a host country, and others need to customize their existing offerings to maintain the level of complementarity with local complementors in the host country.

As firms under such ecosystem-specific model are organized around a final value proposition, they are able to create value only when all the complementary components are present. In other words, to outcompete local and international rivals, platform-centric ecosystems need advantages arising from a greater range of external resources, positive externalities among their activities, and effective governance that keeps ecosystem participants aligned with the interests of the ecosystem. Further, the transfer and exploitation of ecosystem-specific advantages are constrained by “bottlenecks” which interfere with the functioning of the ecosystem in a new market. Both cost reduction and value creation approaches may help mitigate such bottlenecks.

This research then proposes a framework that can be applied to future research on digital platforms, focusing on three avenues, namely, the users, suppliers of complementary products, and platform firms. It is also expected that future IB research would focus on the dynamic process of upgrading ESAs.