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A Profit Framework Model for Digital Platforms Based on Value Sharing and Resource Complementarity

Author

Listed:
  • Tianyu Deng

    (School of Business, Southwest Minzu University, Chengdu 610041, China)

  • Limeng Qiao

    (School of Business, Southwest Minzu University, Chengdu 610041, China)

  • Xun Yao

    (School of Business, Southwest Minzu University, Chengdu 610041, China)

  • Shuangying Chen

    (School of Economics and Management, University of Electronic Science and Technology, Chengdu 611731, China)

  • Xiaowo Tang

    (School of Economics and Management, University of Electronic Science and Technology, Chengdu 611731, China)

Abstract

With the advent of the smart economy, Chinese digital platform companies have begun the process of digital innovation. The sudden outbreak of the COVID-19 epidemic in early 2020 has added a strong impulse to the acceleration of this process, highlighting the unique characteristics of the platform economy in resource allocation. Although digital platforms have already entered people’s daily lives, the profit mechanism of digital platforms remains a black box to be cracked for the industry. The main contribution of this paper is to propose a framework model for the profit mechanism of digital platforms, which to a certain extent solves the problems essential to the digital realm faced by many traditional enterprises in the Internet age—knowing that the profit theory of traditional monopolies is not suitable for the rapidly changing internet economy, but that most of the time people still must use it. In this new profit framework, we first use the symbiotic logic of value sharing to explain the underlying logic of platform profitability; secondly, from the perspective of resource complementarity, we find that the key to digital platform companies’ profitability lies in the symbiotic synergy between platform companies and massive userbases; lastly, our study finds that the profit condition of platform enterprises is digital capability, not system possession. This article will analyze the bottom layer of the digital economy and, by identifying the various drawbacks of the traditional industrial economic monopoly theory, propose three key factors for the profitability of platform companies in the digital age: flexible strategy, digital capabilities, and symbiotic synergy capabilities. On this basis, a theoretical model of the profit of a digital platform is constructed. Research shows that the hybrid structure of digital platforms and the need for external diversification together lead to a platform’s resilience strategy. The realization process of the platform’s strategic flexibility and the process of consumers obtaining the residual value will lead to an explosion in network effects, causing the platform and users to complete value co-creation and realize value sharing. The implementation of a flexible platform strategy also promotes the further development of a differentiation strategy and a more-refined division of labor for manufacturers, lowers the barriers-to-entry in the industry, and enables the platform and the manufacturers to realize value co-creation. On the one hand, platform enterprises can obtain greater market performance; on the other hand, users’ personalized needs can be more satisfied.

Suggested Citation

  • Tianyu Deng & Limeng Qiao & Xun Yao & Shuangying Chen & Xiaowo Tang, 2022. "A Profit Framework Model for Digital Platforms Based on Value Sharing and Resource Complementarity," Sustainability, MDPI, vol. 14(19), pages 1-18, September.
  • Handle: RePEc:gam:jsusta:v:14:y:2022:i:19:p:11954-:d:921802
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    Cited by:

    1. Hongxia Zhao & Guangming Xu & Lu Liu & Changchun Shi & Huijuan Zhao, 2023. "Low-Carbon Technology Innovation Decision Making of Manufacturing Companies in the Industrial Internet Platform Ecosystem," Sustainability, MDPI, vol. 15(4), pages 1-17, February.
    2. Sun, Qiao & Wang, Chang & Zhou, Yifang & Zuo, Lyushui & Song, Huiling, 2023. "How to build business ecosystems for e-waste online recycling platforms: A comparative study of two typical cases in China," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    3. Lihua Jiang & Wei Chen & Shichang Lu & Zhaoxiang Chen, 2022. "Regulatory Effect on Information Sharing of Industrial Internet Platforms Based on Three Differentiated Game Scenarios," Sustainability, MDPI, vol. 15(1), pages 1-25, December.

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