Platform economy examined via sociological perspective

By WANG DI / 06-27-2024 / Chinese Social Sciences Today

A depiction of an engineer inspecting a manufacturing process using a holographic control schematic display. Photo: TUCHONG

The platform economy’s development has drawn close attention from researchers. Previous studies evaluated this business model through the lenses of policy and regulations, examining its business operation practices, and critiquing current realities from the standpoint of labor relations. However, there is a lack of in-depth understanding and detailed knowledge about the actual evolution of platforms, the motivations, behaviors, or strategic dilemmas facing platform architects, and the factors that promote or restrict platform development. This deficiency makes it difficult to effectively explain the developmental experiences and challenges facing China’s platform economy. Limited survey results remind us that understanding the policy, interpreting the market, and valuing and integrating research achievements from other disciplines are of great significance to conduct sociologically oriented investigations into the forms and issues of the platform economy.

Types of platform economies

The development of the platform economy is varied, presenting different types. Its mechanism is based on “industrial platformization,” which places “industry first, platform later.” In this model, well-established traditional industries use digital platforms to upgrade and transform. Consequently, platforms extend business scope, lengthen the business chain, optimize management processes, enhance organizational efficiency, reduce transaction costs, simplify delivery procedures, and improve service outcomes and customer experiences. Research on this type of industrial platform focuses on how industry experience leverages existing platform advantages to overcome developmental bottlenecks in the platformization of existing business models.

Inversely, “platform industrialization” is when the “platform is first, industry later.” Here, platform structures, service systems, and business models are gradually applied to sectors such as consumption, transportation, home renovation, and employment. This approach empowers traditional industries through digital technologies like cloud computing, big data services, e-commerce, social media, and online education. Research on this type of platform observes the complex tension between the general platform operation model and the unique characteristics of various industries.

Platforms exist along a spectrum of government-enterprise relationships that has evolved over time. At one end, we find “government-led platforms,” such as those for public services, food safety supervision, and cultural education. While these platforms may involve technical enterprise operations and generate some economic benefits, their primary focus is on government management and service objectives. 

Next are “government-dependent platforms,” which rely on data resources and authorizations from government departments, such as human resources, social security, or financial regulation, to provide services and achieve value gains.

The third type involves “platforms cooperating with government,” where industry-specific and local service platforms develop in highly localized settings. These may include industries catering to regional specialties and local life services, promoting industry growth while aiding local government decision-making.

At the other end of the spectrum are “platform enterprise-led” models, typically involving mature platform enterprises that operate across regions or even industries and maintain relatively independent cooperative relationships with local governments. The goals and performance of these different platform types vary significantly.

The classification of platform economy forms is not limited to the aforementioned methods. Yet, researchers and practitioners still need to define and understand platform types further, placing platform economy research within a socially oriented classification system. Clearer distinction and examination can interpret the nuanced differences in China’s many platform manifestations.

Stages and process analysis

The specific forms of platform operations depend on each platform’s stage of development, and each stage presents different core issues. On one hand, a process analysis that spans different stages of development needs to examine the platform economy’s evolution and changes over time. Our research on traditional manufacturing enterprises revealed that a strong industrial foundation and accumulated experience have endowed these enterprises with a concrete market share and revenue capability. At present, most enterprises do not find it necessary to undergo platform transformation because they can already achieve profitability through their design experience, customer orders, and current market trends. At the same time, platform transformation is not feasible for some enterprises due to insufficient talent pools and high R&D costs.

However, in the medium to long term, enterprises developed under low-tech models face challenges such as poor substitutability, intense competition, and high risks of “involution.” These enterprises need to think out of the box and seek new development tracks and scenarios to establish differentiated advantages in less competitive fields. 

Consequently, some enterprises have recognized the advantages of operating platforms upon establishing online platforms and e-commerce spaces in their industry sectors. These online platforms replace traditional trade fairs and exhibitions, overcoming the temporal and spatial constraints of supply-demand relationships. They integrate industry resources, connect with upstream and downstream industries, and enhance their comparative advantages within the industrial chain, ultimately enabling leapfrog upgrade. 

On the other hand, a process analysis that spans different stages of development must examine the platform economy’s spatial radiation and diffusion. Our research on the digitization of supply chains in some platform enterprises shows that from procurement, warehousing, logistics, and sales to delivery, the chain management is optimized through artificial intelligence and big data technology. This optimization improves supply chain algorithms, enhances predictive capabilities and response speeds, increases logistics efficiency, reduces inventory costs, and provides faster delivery services to consumers. 

Ultimately, the spatial linkage of such platform operations with the real economy relies on the comprehensive implementation and diffusion of digital technology at spatial points like agricultural product sourcing, consumer goods production, transportation networks, logistics warehousing, delivery routes, reception points, and urban-rural communities. This spatial diffusion process is also social, involving labor organization, occupational services and protections, and internal group relations at each stage.

The platform economy follows a dual development rhythm in terms of temporal progression and spatial diffusion. This reminds us to focus on longitudinal, continuous investigation and process-oriented, dynamic research on the early manifestations, actual pathways, specific links, critical turning points, and long-term chains of this new form of business.

Understanding stakeholders

In the emergence and development of any economic form, social actors are not passive recipients of specific roles. Instead, they provide economic momentum, evaluate economic outcomes, and determine economic trends through their actions in both production and life. Therefore, researchers need to deeply understand the demands, desires, states, choices, behaviors, and emotions of the many groups involved in the platform economy.

Platform enterprises exhibit complex compositions in their attitudes and promotion strategies. The entrepreneurs or owners of platform enterprises typically have a strong sense of innovation, are concerned with the possibilities of long-term development and upgrading, and are willing to try new business models and technological applications. The management group is focused on identifying and handling new risks associated with the platform industry, from a medium- or short-term perspective based on financial considerations. They must also address specific issues from the angles of management processes, organizational culture, and personnel structure. Developers focus on the contributions brought by platform development and technological upgrades, regarding it as their core mission. Executives and workers within the company tend to consider the feasibility and convenience of changes in job content brought by platform transformation, while also being cautious about potential labor alienation and technological substitutions. To some extent, the differences in perspectives among the stakeholders within platform enterprises affect the degree of internal coordination and partly determine the advancement of the platform economy.

Researchers need to evaluate the labor conditions within the platform economy more objectively. Existing studies have extensively discussed phenomena such as unstable employment, fragmented work, and atypical labor relations, which are all critical issues that deserve our continuous attention and vigilance. Nevertheless, more workers are choosing platform-based employment, or “voting with their feet,” because of its positive aspects. Platforms can dynamically reflect supply-demand relationships, broaden workers’ access to job information and resources, and offer opportunities to enhance human capital, improve working conditions, and protect labor rights. 

In the meantime, platforms can promote transparent and standardized employment practices, partially preventing excessive exploitation and respecting workers’ rights. From the perspective of regulatory bodies, platforms can help reach an expanding labor force, gather information about their conditions and needs, and gradually address their concerns to implement governance measures effectively.

From these perspectives, platform economy research must delve into the minutiae of daily life, focusing on the individuals directly involved in economic activities. It is essential to restore the subjectivity, agency, and reflexivity of entrepreneurs, managers, and workers, understanding their choices through their labor and lives.

Overall, examining the unique operational models and labor processes of the platform economy requires not only classification, process analysis, and an immersive understanding but also the introduction of organizational management and environmental analysis perspectives. It is crucial to study the control methods and power relations within platform organizations and their interactions with the external environment. A sociological perspective undoubtedly aids in better comprehending the complexity of the platform economy and provides more targeted guidance for scientific research, policy-making, and business practices.

Wang Di is an associate professor from the Department of Sociology at Peking University.

Edited by YANG XUE