Treading a Tightrope: Political Externalities and Platform Strategy

Abstract : A platform's success depends crucially on generating and growing positive network externalities among its various user sides. However, actions undertaken by the platform to generate and manage positive network externalities simultaneously generate political externalities, as platform users are also political agents, and constituents of states. We explain how these political externalities are caused by platform actions and examine their impact at two levels: individuals i.e., platform users and other state constituents, and states. We analyze the interplay of positive network externalities and (negative) political externalities for the platform as it potentially changes user membership and participation on the platform, and triggers changes in the platform's non-market environment as a result of interventions by states. Finally, we draw implications for platform strategy and policy.

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To Do or to Teach? the Dichotomy Between Franchising Vs Management Contracts in the Hospitality Industry

Abstract : Although franchise and management contracts constitute the dominant way of organizing business-to-business relationships within hotel chains, no study has compared their relative performance. This paper aims to explain their differences and assess their impact on online scores, currently a key performance indicator in the hotel industry. We argue that franchises are less effective than management contracts for operating upscale hotels due to the relative advantages that the latter have in transferring and enforcing tacit knowledge, typically embedded in skilled staff and very relevant in such quality-tier hotels. Conversely, franchising is better for large hotels because, first, its incentive structure better addresses managerial shirking (typically more severe as hotel size increases) and, second, it offers advantages when the normalization of business procedures is key to success (as is true for large establishments). Our empirical findings broadly support these arguments in a dataset of 220 Spanish hotel groups, also providing evidence that no single organizational solution fits all situations.

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The Organization of Innovation: Incomplete Contracts and the Outsourcing Decision

Abstract : Why do firms outsource research and development (R&D) for some products while conducting R&D in-house for similar ones? An innovating firm risks cannibalizing its existing products. The more profitable these products, the more the firm wants to limit cannibalization. We apply this logic to the organization of R&D by introducing a novel theoretical model in which developing in-house provides the firm more control over the new product's location in product space. An empirical analysis of our testable predictions using pharmaceutical data concerning patents, patent expiration, and outsourcing at various stages of the R&D process supports our theoretical findings.

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