TUM Campus Heilbronn Strengthens Its Platform Economics Research Through Well Earned Grant

Prof. Dr. Jens Förderer, Professor of Innovation and Digitalization at the Center of Digital Transformation at TUM Campus Heilbronn, receives DFG funding for the project: Competition with the platform owner: An empirical-quantitative investigation of mobile app platforms. The funding constitutes an outstanding achievement for Prof. Förderer’s research, and shows how the TUM Campus Heilbronn has – after only a short period of time – grown to conduct relevant and cutting-edge research, especially on one of the core topics of digitalization: platform business models.

Digital Platforms and Ecosystems

Platforms are currently the subject of debate throughout the entire economy. The German government has recently made the topic the focus of its Digital Summit. Platform strategies are the business models of many of the world’s most valuable internet firms: Amazon, Google, Apple, Facebook, Uber, etc. – all these companies derive their success from platform strategies. “Instead of selling products, the so-called platform firm provides a digital platform that enables transactions between different market players. Amazon is a well-known example: It allows a large number of companies to sell their products on the Amazon platform. Amazon then profits through a transaction fee,” explains Prof. Förderer, Professor of Innovation and Digitalization at the TUM Campus Heilbronn. Facebook works in a similar way: “Facebook provides a free platform where we can create our personal profile, stay in touch with others and share news and experiences. At the same time, Facebook allows other companies to run targeted ads based on our contacts, interests and the content we share, and makes money of the fees for those ads”.

Recently, large platform firms such as Amazon and Facebook have been criticized for being too powerful. In the USA and Europe, antitrust law proceedings have been initiated to break up these platforms or regulate them more strictly. “A core reason for these proceedings is that platform firms regularly compete with their own partners, e.g. merchants on Amazon or advertisers on Facebook, and that this is interpreted as anticompetitive,” explains Jens Förderer. Amazon, for example, has been accused of regularly manufacturing copycat products from merchants on its own platform and thus ousting the merchants from their markets. “However, it is debated whether such a competition between platform firms and their partner companies should be regarded as anti-competitive. An alternative hypothesis would be, that competition between platform firms and partner companies could be a proven means of strengthening the platform as a whole. For example, by competing specifically with merchants on its own platform, Amazon can ensure low prices for consumers, encourage merchants to invest in higher product quality, and drive innovation. This remains, however, a debate that lacks evidence.”

Research on this topic is therefore essential to confirm or disprove assumptions and to test new hypotheses. Funded by the German Research Foundation (DFG), Prof. Förderer is now devoting his research to precisely these questions: “In our project, we want to examine the competition between platform companies and partner companies more closely. We want to understand how platform companies compete with partner companies and what effect this competition has. We expect our results to have important implications for our understanding of platform business models that will further provide a differentiated picture for regulators as well as platform companies.” The project is highly complex, especially regarding the collection of high-quality data on partner companies. With this funding, the DFG fills a critical component: “The funding enables us to build a new, well-structured database on concrete competitive situations between platform firms and their partners. This database will not only serve our own analysis with regards to our research questions, but will also be made available to researchers of other disciplines. The database could for example serve legal scholars as a case study database.”

An Outstanding Success

Prof. Dr. Jens Förderer, Professor of Innovation and Digitalization at the Center of Digital Transformation at TUM Campus Heilbronn

The DFG funding constitutes an outstanding achievement for Prof. Förderer’s research and a great success for the TUM Campus Heilbronn. “For me, this funding means a financial and personnel strengthening of my professorship. Furthermore, it is an important signal for me that research on platform business models and network effects is needed. I am convinced that platform economics will shape economic activity even more than we have assumed so far. Just look at the start-up scene: every second start-up already pitches a platform strategy to its investors. In Germany, we are lagging behind the USA and China, almost all important platforms do not come from Germany. In my professorship, we develop knowledge about this new form of business and provide specific recommendations for companies that want to launch a platform as well as for those that compete with platforms. The DFG funding strengthens our previous efforts in this area and motivates us to continue working with even greater focus.”

For the TUM Campus Heilbronn, the funding by the German Research Foundation is an important signal that shows how the TUM Campus Heilbronn has – after only a short period of time – grown to conduct relevant and cutting-edge research, especially on one of the core topics of digitalization: digital platforms and ecosystems. Exploring Digital Transformation is one of the core goals of the Heilbronn campus and thus this funding is another building block in the vision and mission of the TUM Campus Heilbronn.

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