Monthly Archives: June 2012

Who Benefits When Online Platforms Flatten Markets For Contract Labor?

The convergence of the proliferation of “online labor platforms” and the lingering employment crisis has catalyzed attention to “online labor platforms,” as indicated by this NY Times article “The Boom in Online Freelance Workers.”  Innovation and disruption go hand-in-hand–certainly where online platforms are emerging in the domain of work.

A March 2012 research paper by Ajay Agrawal, et al, “How Do Online Platforms Flatten Markets for Contract Labor?” develops in-depth analysis of one potential area of disruptive effects:  namely the flatten of contract labor rates across advanced and emerging economies.  Here is the abstract:

Despite the internet’s ability to “flatten” markets, we find evidence of a significant penalty for job applicants from less developed countries (LDCs) on a major online platform for contract labor; developed country (DC) employers are less likely to hire LDC applicants, even after controlling for many observable characteristics including education, experience, and posted wage. However,platform-specific experience, which increases the likelihood of success for all applicants, has a disproportionately large benefit for LDC applicants. We attribute this DC employer behavior to the standardized and easily verifiable attributes of this platform-specific information, which disproportionately benefits applicants from LDCs whose off-platform experience and education is costlier for DC employers to evaluate. Our interpretation is consistent with another finding that LDC employers, whom we posit are more easily able to evaluate off-platform LDC experience, neither penalize LDC applicants nor disproportionately reward their platform-specific experience. Furthermore, we find evidence that DC employers with more experience on the platform are significantly more responsive to platform-specific experience, implying that even this information is costly to interpret since it requires investing in experience on the platform.

 The paper was published electronically on the internet earlier this year and is available here:  OLLaborPlat.



On the way to Part 2: “‘Modern Platforms’ and ‘Service Science:’ New Ways of Understanding “Platform” Mechanisms, Interests, and Outcomes

In recent weeks, I have been getting underway to develop Part 2 of the working paper I drafted in late 2011, “Part 1: ‘Modern Platforms’ and ‘Service Science:’ New Ways of Understanding ‘Platform’ Mechanisms, Interests, and Outcomes.”  Whereas Part 1 mainly introduced “Service Science” as a way of understanding “modern platforms,”  Part 2 will be more focused on the topics of mechanisms and interests (and I am realizing I will be needing a Part 3 to address the subject of outcomes).

Having said that (and in anticipation of Part 2),  I realize that I did provide some commentary on “mechanisms” in Part 1 and that it might be helpful to provide an excerpt of that commentary here, without the numerous citings and comparisons to “service science” theories and concepts, as some contextual stage-setting for Part 2.   So here it is:

Platforms are a kind of regulating membrane (a selected and configured repertoire of protocols, mechanisms, rules, regulations, etc.) that provides a normative and structural framework for the organization of “service systems” and “value-creation networks” relationships and interactions, through which value is created and exchanged.  

Platforms emerge under certain conditions, as opportunities to establish and enact value co-creation and exchange are discovered to be possible and realizable, and they are then exploited and capitalized on by different “service systems” in different ways.  Perhaps the most important condition that has created opportunities for the discovery and exploitation of expanded protocols, mechanisms, etc. that make up “modern platforms” is information technology. At any rate, the possibility and potential for specific “artificial constructs or entities” (platforms) arise out of conditions, but the platform constructs and entities are not actuated until some “service systems” have actuated them by discovery and selection, design and manipulation, or even  by accident. 

What are some of the protocols, mechanisms, rules, etc. that may be operant in “modern platforms?”  Some might involve the volume and rate of integrating different kinds of geographically-dispersed “service systems” in a broader range value co-creating interactions and exchange relationships.  One might be the ability to maintain exchange relationships that are not dependent on single or infrequent significant transactions, but are somehow based on other norms of relationship and exchange that are reinforced by different mechanisms.  Another might be different arrangements for value-extraction and monetization (aka, pricing and revenue models) across “service systems,” time, certain conditions, etc.  Some possibilities and opportunities present in the “genome” of the “modern platform” have been discovered and exploited by different “service systems” to date, others may still be discoverable and then subject to exploitation. 

In some cases, a single “service system” (a company or a person, for example) can lead and/or dominate this process of discovery and exploitation, and such a lead or dominance may confer leverage to that particular “service system” to guide or regulate value creation and exchange and to even extract a higher or dominant share of value for itself.  The “platform businesses” that have been hailed by Phil Simon in The Age of the Platform would presumably be among such “service systems;” these companies (and in some cases, mainly a central lead entrepreneur) have been able to extract and shape from the raw possibilities of today’s “modern platform opportunity set” a subset of different protocols, mechanisms, etc. and have been able to lead, nurture, advance the development of particular “value-creation networks” in which that originating company/”service system” comes to dominate and to some extent control the service ecosystem (through more leverage in the balance or exclusive access to certain mechanisms, etc.).

Certainly, actuating and exploiting the “artificial” construct or entity that a “modern platform” consists of is not a simple task, rather one that requires significant insight and computation (intelligence) within and across “service systems.”  Establishing a functioning platform is in some sense like establishing a new complex game (rules, etc.) AND getting players engaged and playing.  However that occurs or is accomplished (whether by a “creator” and “master” or a by swarm), in the end, there will be “a game,” the “artificial” construct or entity we are calling the “platform.”  The “platform” is therefore a distinct “something,” though not really visible or easy to define:  it is what makes the playing of the game (“value-creation network”) possible and actual for all the engaged “service systems.” But we are only beginning to understand the nature and the properties of this “something” in an economic context, even as companies and individuals are leveraging and exploiting it through their “modern platform businesses.”

My most recent post, “Memento Mori:  ‘Digital Remains’ and the Regulative Functions of Platforms,” also provides some hints as to where I will be heading in Part 2.