The Dark Side of Powerful Platform Owners: Aspiration Adaptations of Digital Firms

This study provides a timely and critical perspective on the negative influences of powerful platform owners (PPOs) on the strategy aspiration adaptations of digital firms operating on these platforms. Contrary to the tenets of the behavioral theory of the firm, the aspiration adaptation of digital firms is largely influenced by PPOs rather than autonomously based on market- and competition-based referents. We call this Faustian bargain—the trade-off between the utility and advantages offered by PPOs’ technology affordance and the loss of aspiration adaptation control of independent digital firms—the “dark side” of powerful platforms. Drawing on resource-dependency logic and illustrative cases, we uncover how PPO characteristics, structural mechanisms, and the use of undesirable tactics manifest this phenomenon. In addition to uncovering the dynamics of an increasingly critical managerial and scholarly phenomenon, we provide much-needed implications for PPO governance practices and policies. Further, we advocate the formation of new institutions that can match the dynamic development of the digital platform economy with adaptive regulations and enforcement, superseding existing but ineffective antitrust laws mainly based on the pre-digital world.