What is the Effect of Digital Platform Capabilities on the Opportunity Set? The Moderating Role of Governance Mechanisms

Abstract

Abstract In the digital age, certain digital platforms, such as Google Android and Tencent, have experienced remarkable growth. Nevertheless, other digital platforms encounter severe challenges that contribute to their downfall. The development disparities among digital platforms are primarily attributed to the opportunity set, an aspect still underexplored in the existing research. Based on the Chinese context, this study adopts the dynamic capabilities view to investigate how digital platform capabilities, specifically platform integration and reconfiguration capabilities, influence the opportunity set from the perspective of complementors. Additionally, we examine the moderating impact of governance mechanisms, encompassing formal contracts and relational mechanisms, challenging the prevailing notion that formal contracts always benefit platforms. Drawing insights from survey data including 476 complementors across 48 Chinese digital platforms, our findings reveal that the positive relationship between platform integration capability and the opportunity set is strengthened when formal contracts are employed. However, the positive relationship between platform reconfiguration capability and the opportunity set weakens with formal contracts but strengthens with relational mechanisms. Our study enriches the opportunity set research by empirically revealing the formation mechanism of the opportunity set in digital platforms from the dynamic capabilities view. Furthermore, it extends the application of platform governance literature by introducing nuanced perspectives on the boundary conditions of governance mechanisms in the Chinese context. Ultimately, this paper offers valuable practical insights for platform owners in China, guiding them in enhancing their capabilities and crafting effective governance mechanisms. Simultaneously, it provides direction for Chinese complementors to leverage both formal and informal relationships with platform owners, effectively transforming digital platform capabilities into the opportunity set.