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Beyond markets, hierarchies, and hybrids: an institutional perspective on IT-enabled two-sided markets

Author

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  • Kai Reimers

    (RWTH Aachen University)

  • Xunhua Guo

    (Tsinghua University)

  • Mingzhi Li

    (Tsinghua University)

Abstract

The term ‘two-sided market’, coined in the early 2000s, refers to a novel IT-enabled form of organizing economic activities exemplified by such firms as Uber, Amazon, and Taobao. While a rich literature has explored the phenomenon of two-sided markets, it has done so from a narrow technical perspective focusing on pricing issues. In this paper, we develop a novel framework to classify and characterize two-sided markets from an institutional perspective by extending and combining crucial categorical distinctions made by Williamson and Commons, one of the main sources of inspiration for Williamson’s Transaction Cost Economics. This new classification scheme identifies three institutionally distinct types of two-sided markets which are functional equivalents of traditional forms described by Williamson as markets, hybrids, and hierarchies. This suggests that two-sided markets may, under certain conditions, replace such traditional forms. We also develop a new proposition concerning the role of information technology in such a possible shift.

Suggested Citation

  • Kai Reimers & Xunhua Guo & Mingzhi Li, 2019. "Beyond markets, hierarchies, and hybrids: an institutional perspective on IT-enabled two-sided markets," Electronic Markets, Springer;IIM University of St. Gallen, vol. 29(2), pages 287-305, June.
    • Handle: RePEc:spr:elmark:v:29:y:2019:i:2:d:10.1007_s12525-018-0319-0
    DOI: 10.1007/s12525-018-0319-0
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    Cited by:

    1. Natalia Szozda & Artur Świerczek, 2022. "Upstream and downstream dyad governance within the network structures: Creating supply chain governance for the customized products," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(2), pages 873-898, June.
    2. Rainer Alt & Hans-Dieter Zimmermann, 2019. "Electronic Markets on platform competition," Electronic Markets, Springer;IIM University of St. Gallen, vol. 29(2), pages 143-149, June.
    3. Laura Studen & Victor Tiberius, 2020. "Social Media, Quo Vadis? Prospective Development and Implications," Future Internet, MDPI, vol. 12(9), pages 1-22, August.
    4. Rainer Alt, 2022. "Electronic Markets on AI and standardization," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(4), pages 1795-1805, December.

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    More about this item

    Keywords

    Two-sided markets; Institutional economics; Platform competition; IT-enabled organizational change; Coordination mechanisms;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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