The dark side of digital platforms: understanding small and medium enterprises' dependence on third-party platforms

The digital platform business model has evolved and become a dominant form of economic interaction worldwide. Small and medium enterprises (SMEs) had to shift their business to platforms to survive in this new market. While existing studies show the positive side of SMEs' use of platforms, there has been little research on the dark side of their participation in the platform economy, particularly their high dependence on platforms. We conducted a qualitative study to examine the mechanisms of dependence and its repercussions on SMEs' performance. Our findings suggest that SMEs' dependence on platforms arises from high importance, low discretion, and limited substitutability. We also find that, beyond their dependence on single platforms, SMEs generally become dependent on an oligopolistic system of dominant platforms. This dependence heightens the power asymmetry between platforms and SMEs. We highlight major manifestations of this power asymmetry, including the platform's ability to restrict access to resources and to prioritize different stakeholders' interests in their ecosystem.