Exploring the new phenomenon of economic platforms

A platform is a foundation on which others can stand, and the same is true in economics. If you build a digital platform, for instance, other businesses can easily connect their business with yours and build products and services on top of it. Take Apple or Android, their real success is not from features or functions, it is from the app store which allows external developers to create value. The Platform Value Now project, funded by the Finnish Strategic Research Council, focuses on understanding these emerging platform structures and how they could work in the Finnish economy.

The typical features of the current platform companies are: a global nature, extremely fast growth, and lots of interest from investors. Companies such as Amazon, Airbnb, and Uber are operating globally and collecting a large share of the value generated.

Currently, 80% of platform businesses are American and 80% of these are located in California. The recent developments indicate that those companies that are fast to join existing platforms or initiate platforms themselves are starting to dominate, making it difficult for others to get into the market. For a policymaker in Finland, or anywhere outside the USA, the challenge is that the value staying in the country is currently small, and it therefore does not support local employment.

The potential impact on public funding is even more serious, because a large amount of the taxable income is transferred to another country. To assess the impact of this, IIASA researchers have developed methods to measure the un-captured GDP, that is, the share that is lost to platform companies operating from other countries [1][2].

As part of the project, IIASA researchers have analyzed platform policies in different countries and alternative government roles and options. These were part of a special report on global scenarios and alternative pathways of platform economy development, which contributed to the prime minister’s strategic development project: the Road Map of the Finnish Platform Economy, to be published in 2017.

The project continues to collaborate closely with the team of senior civil servants that are responsible for platform economy development in the Corporate Steering Unit of the Finnish Ministry of Employment and the Economy.