Platforms Enhancing Proximity in the Digital Era

Abstract

Platforms have the ability to create connected digital spaces where different actors co-exist and work together. The paper explores the power of platforms as enablers of a new channel of proximity, called digital proximity. It argues that platforms enable interactions, information flows, and network formation through digital proximity, which can effectively reinforce externalities complementing existing proximity forms or bypassing physical space barriers. Firms and industries adopting platform-based tools can create meaningful channels for increasing their proximity at an intra- and inter-firm level. The study uses data from the Digital Economy and Society database covering 25 EU countries for the years 2019 and 2021. It calculates the degree of adoption by EU firms at the national level for a set of selected platform-based technologies closely related to different proximity forms. It investigates the relationship between digital proximity, firm size, and industry, also introducing a geographical dimension. The evidence suggests that large firms have managed to integrate platform-based technologies to a greater extent, whereas small and medium firms still lack leveraging the full power of platforms. Increased adoption at the country level is also related to increased productivity, indicating the geographical dimension of platforms. The paper argues that platforms can be seen as a new means for balancing uneven spatial capabilities for producing proximity, indicating a high potential for fostering territorial cohesion. It concludes by suggesting that future research should measure the effects of digital proximity on development and their causal relationship to better elaborate on the implications of platforms on development.