Platforms Are the New Organizational Paradigm
Business organizations can take many forms, from founder-led to multidivisional multinationals to emerging IT-enabled platforms. The prevailing organizational form in business is neither set in stone nor decided upon by fad. It is largely a result of the technological and economic conditions of the time. There were no large U.S. corporations before the emergence of the railroad because the production system neither required nor enabled scale, which corporations are designed to manage. When rail and industrial production technologies evolved after the Civil War, large corporations became the norm. Justice Louis Brandeis and other opponents of these new corporations sought to squelch them in their infancy, preferring a prior economy dominated by owner-led, small and mid-sized firms. Even with the passage of the Sherman Act, their opposition was largely stillborn; the benefits of the corporation were simply too vast. However, had the Brandeisians succeeded in their quest to turn back time, America would not be the global economic leader it is today.
We are potentially at a similar transformative point in history, with digital technologies enabling the rise of a new kind of productive organization: the platform. Digital platforms, not just in the information sector, have the potential to transform many industries for the better: raising productivity, improving quality and consumer choice, and reducing prices. But just as there was significant opposition against the transition to the corporate economy, today there is significant opposition to the platform economy, although this time not among the populace, but rather among the elites: activists, public intellectuals and academics, and elected officials of both parties. If their attempts to roll back the “platformization” of the U.S. economy succeed, the economic costs to the nation and to consumers would be considerable and long-lasting.
This report assesses the past two major changes in corporate form, and the public and government responses to them. It then examines the prospect and potential benefits of the “platformization” of the economy, as well as current opposition. Finally, it discusses the variety of policy approaches proposed to address platform governance and why most will lead to more harm than good.