This paper aims to explore the governance of external entities that lie outside the boundaries of digital platform firms by using the theoretical lens of the transaction cost theory (TCT). TCT offers alternative modes of governance for effectively managing transactions in market, hierarchy or hybrid scenarios providing a perfect framework to study platform governance.
The paper explores governance issues between restaurant partners and online food delivery platforms in India via qualitative analysis of semi-structured interviews of various stakeholders, including restaurant partners and platform managers.
The study reveals that information asymmetry, opportunism, control and trust deficit are the major strategic governance issues in online food delivery platforms.
Though care had been taken to cover all types of restaurants, due to lockdown number of restaurants studied was restricted in number. Despite the restrictions, findings provided valuable insights into the governance issues of the digital platform. Challenging times like Covid-19 make the study even more crucial from the strategic perspective. The study also adds to the literature on platform governance and provides practical implications for account managers and policymakers.
The study uncovers various critical governance issues. These, if resolved using the right combination of governance mechanisms, will lead to increased partner participation and value creation on the platform.
Platforms outsource the value creation to external entities without having any hierarchical control over partners. The paper studies governance outside the boundaries of the firm using TCT. Hence, it helps to extend governance outside the boundaries of the firm.
