The Developmental Value of Digital Platforms in the Global South

Digital platforms are used in the business models of many of the world’s biggest companies and they impact people across the globe in various ways. A survey conducted in 2015 identified 176 platform companies in the world, with an estimated global market capitalisation of $4.3bn — about the same as Sierra Leone’s gross domestic product. Areas such as employment opportunities, social interactions and transportation are increasingly organised through these platforms. Traditionally, most of the platforms and their main markets have been in the global North, yet companies and people from the global South are also adopting and using digital platforms to run their businesses and daily lives.

This raises important questions on the developmental implications of digital platforms. Recently, valuable research has looked into important areas of digital platforms, such as work conducted within the DIODE Network on digital labour, or on innovation ecosystems of open data platforms. As digital platforms continue to have ever-wider significance, further research is needed. A new DIODE working paper – Digital Platforms in the Global South: Foundations and Research Agenda – suggests that, in order to conduct meaningful research in the area, it is necessary to understand the foundations of digital platforms and the key factors of their functioning, as well as discussing their developmental implications.

Definitions matter: two types of digital platforms

The working paper distinguishes between two main types of digital platforms: transaction and innovation platforms. Transaction platforms, or exchange platforms, facilitate interactions between users by reducing transaction costs. They base their functioning on either direct or indirect network effects, where the former refer to a network (or platform) becoming more valuable to each member as more users join, and the latter to the value created when increasing the base of users in groups that are complementary to each other. Common transaction platforms are M-Pesa, Uber or AirBnB. The second type of digital platforms are innovation platforms, whose distinctive feature is to provide technological building blocks for developers to build services and products on top of them. Common innovation platforms are Android or Apple’s iOS.

A research agenda to study digital platforms in the global South

Building on digital platforms’ typology and how they operate, the working paper puts forward and discusses four different research areas for studying the developmental role of digital platforms in the global South:

• How to better release the developmental potential of innovation platforms, be that in the form of platform design, development or usage.
• How digital platforms in the global South differ from the ones in the global North, and what kinds of institutional implications these platforms may have in a developing country context.
• Do digital transaction platforms exacerbate or help to diminish existing inequalities in the global South?
• What are the alternatives for current digital platforms, especially in cases when they function less than optimally in enabling development?

All of these areas aim to cover different aspects of digital platforms and development. Overall, digital platforms are likely to have both positive and negative implications for people in different locations of the world, and the impacts may come in various forms and differ from one context to another. Research on the topic is therefore crucial to understand these matters better and to help to steer the creation and functioning of digital platforms towards better developmental outcomes. The working paper provides a foundation for this type of research for scholars and other actors interested in the topic.