Corporate Strategies in Digital Platform Firms vs. Traditional Firms

This study examines how the corporate choice of strategic uniqueness and diversification differs in impacting firm performance of traditional and platform firms. Recent literature on corporate strategy indicates a uniqueness and diversification discount for traditional firms. Thus, the study aims to contribute to the understanding of how this discount might change when looking at platform firms instead. Based on agency theory it is depicted how the information problem, which is a major factor for the undervaluation of unique and diversified firm strategies, is limited for digital platform firms. It is assumed, that pursuing a unique corporate strategy and being diversified, better fits with the organizational environment of a digital platform, than with firms having a more traditional business model. The empirical analysis of 20,208 observations, accounting for 2,746 unique firms over 10-years gives evidence that strategic uniqueness and diversification have a convex relationship with firm performance and that this relationship becomes more extreme for platform firms.