Digital platforms in Russia: competition between national and foreign multi-sided platforms stimulates growth and innovation

Published date08 March 2019
Pages129-145
Date08 March 2019
DOIhttps://doi.org/10.1108/DPRG-11-2018-0065
AuthorYaroslav Eferin,Yuri Hohlov,Carlo Rossotto
Subject MatterInformation & knowledge management,Information management & governance,Information policy
Digital platforms in Russia: competition
between national and foreign
multi-sided platforms stimulates
growth and innovation
Yaroslav Eferin, Yuri Hohlov and Carlo Rossotto
Abstract
Purpose This paper aims to testthe ‘‘winner-takes-all’’ vs the ‘‘winner-takes-some’’ scenarios in digital
platformcompetition dynamics in emerging markets.
Design/methodology/approach This paper uses an analytical reference framework to assess the
emergence of digital platforms in Russia, including four elements: definition of multi-sided platforms
(MSPs),platform enablers, business modelsand competitive dynamics.
Findings This paper concludes that Russia shows that a healthy competition between national and
foreign MSPs led to the emergenceof a shared equilibrium, wherelocal platforms were able to retain a
significant,often majority, share vis-a
`-visforeign and global platforms.
Research limitations/implications This paper standsas a counterpoint to the widespread conviction
that digital platform dynamics will result into a ‘‘winner-takes-all’’ scenario and dominance of global
platforms.
Practical implications This case study offerspractical data and analysis that can beused to create a
baseline and evaluate thedynamics of digital platforms in emerging markets.It offers data, trends and
evidenceon Russia’s digital economy.
Social implications This research provides a logicalframework to help policymakers take decisions
on a policy framework to regulate platforms in emerging markets. The good outcome of competition
between local and foreign platforms should emerge as a policy objective to achieve in most emerging
markets.
Originality/value This case study is the first baselineto assess the dynamicsof competition between
nationaland foreign digital platforms in theRussian market. It is one of the firstpapers to tackle the market
of digital platforms in an emerging and developing economy. It tries to address the debate between
‘‘winner-takes-all’’and ‘‘winner-takes some’’ competitionequilibrium through a concrete casestudy in an
importantG20 emerging market economy.
Keywords Competitive strategy, Multi-sided platforms, Digital economy, Digital business,
Digital platforms, Russian economy
Paper type Case study
Introduction
Digital transformation is an ongoing process, embracing all sectors of the economy and
affecting the way people live. Digital platforms accelerate digital transformation. Rapid
growth of digital platforms across the globe has transformed multiple sectors, enhanced
ecosystem productivity by providing rapid and continuous communication, facilitated
collaboration and co-creation across organizations, boundaries and time zones
and strengthened local markets contestability (World Bank, 2018). Digital platforms disrupt
Yaroslav Eferin is based at
the World Bank,
Washington, USA.
Yuri Hohlov is Chairman of
the Board of Directors at
the Institute of Information
Society, Moscow, Russia.
Carlo Rossotto is Lead ICT
Specialist at the World
Bank, Washington, USA.
Received 13 November 2018
Revised 2 December 2018
Accepted 10 December 2018
DOI 10.1108/DPRG-11-2018-0065 VOL. 21 NO. 2 2019, pp. 129-145, ©Emerald Publishing Limited, ISSN 2398-5038 jDIGITAL POLICY, REGULATION AND GOVERNANCE jPAGE 129
the underlying markets, such as local distribution, transportation and construction, as the
emergence of digital platforms reduce entry barriers, such as the need for in-house
resources, information technology equipment and expertise toestablish and maintain online
presence. Technology transformation can drive economic growth through higher efficiency
and market contestability (Arezki et al.,2018). The diffusion of digital platforms has
economic and socio-political implications. With tremendous opportunities, digital disruption
brings real and perceived risks (World Bank, 2016). Policymakers face challenges in
multiple policy areas, such as competition, consumer and data protection and taxation and
labor relations. Policy and legislation may need to adapt to the new digital context.
Specifically, the interaction among economic agents within digital platforms, the security of,
and access to, the data used by the platform, the data standards and the privacy of the
users, all gain an explicit attention from policymakers. Furthermore, the fast pace of global
digital transformation poses obstacles to emerging markets, where both risks and
opportunities arising fromdigital transformation are magnified. The risk of emerging markets
being dominated by a few foreign and globalized platforms, capable of absorbing and
transferring overseas partof the value of local markets, is a concern to policymakers around
the globe.
In this context, Russia gains a research interest because of the forceful development of its
national platform companies, such as Yandex, Mail.ru and Avito, which have demonstrated
sustained growth of revenues and market capitalization in recent years. The ability of these
platforms to retain significant, sometimes majority, market shares with respect to global
platforms is also of interest and seem to contradict the notion of emerging markets being
dominated by foreign platforms.
Thus, the importance of the Russian platforms for global research is twofold. First,
national digital platforms witnessed fast growth and will be a powerful force shaping the
Russian economy; their impact on the development and contestability of local markets
is noteworthy. Second, national platforms effectively competed with foreign platforms,
retaining a large share of the respective markets; the competition dynamics and
emergence of the “winner-takes-some” scenario can carry important lessons for other
emerging markets.
Consequently, the study defines digital platforms, presents business models,
describes key enabling factors and provides an overview of Russian platform
companies, assessing the evolution of the competitive dynamics between national and
foreign platforms.
Concept of digital platforms
The interrelation between demand and supply has always been in focus for researchers,
economists and philosophers. Historically, marketplaces where a seller and a buyer could
interact led to several mutual benefits, such as reduced logistics costs, increased
consumer awareness, competition and enhanced intensity of trade. Similarly, digital
platforms promote economic relations among agents, improving the basic mechanism of
traditional marketplaces. Digital platforms integrate two sides of the market into a single
network (Rochet and Tirole, 2003), facilitate searching, matching and carrying out
transactions through online tools (Evans, 2013) and increase efficiency by coordinating
sudden changes in supply and demand (Rossotto et al., 2018).
Digital platforms may be defined as “multi-sided marketplaces with business models that
enable producers and users to create value together by interacting with each other” (Still
et al., 2017). Multi-sided platforms(MSPs) also have unique characteristics that significantly
distinguish them from traditional marketplaces. Digital platforms allow to multiply and
replicate traditional market activities with the help of digital technologies, big data storage
and access to information.
PAGE 130 jDIGITAL POLICY, REGULATION AND GOVERNANCE jVOL. 21 NO. 2 2019

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