Leveraging Digital Platforms by SMEs: Opportunities and Challenges
Dr Atreyi Kankanhalli, Provost'S Chair Professor, School of Computing
COM2 Level 4
Executive Classroom, COM2-04-02
Abstract:
Small and medium-sized enterprises (SMEs) are the backbone of most economies. However, their resource constraints, including their limited financial and human capital, hamper their sustainability and ability to grow. Recent studies have suggested that SMEs can leverage transaction platforms (e.g., Amazon, Alibaba) to overcome their resource limitations. In this thesis proposal, I investigate the duality (i.e., the opportunities and challenges) of platforms for SMEs, and the extent to which they help or inhibit SMEs in overcoming resource constraints.
The proposal includes two completed studies and one on-going study investigating this phenomenon, which are summarized as follows:
The first study investigates how transaction platforms, specifically e-commerce platforms, help SMEs in developing organizational capabilities in the presence of resource constraints. Particularly, I ask two research questions: first, what organizational capabilities do SMEs develop by leveraging the platform? Second, how does the platform enable or inhibit SMEs' development of organizational capabilities?
Scaffolding on the organizational learning perspective, I conducted a qualitative field study across 25 retail SMEs in Singapore and found that SMEs are able to develop both operational and dynamic capabilities. Those organizational capabilities were developed as SMEs leverage platform-provided resources that are infrastructural, informational, and reputational. Furthermore, my findings elucidate the underlying learning mechanisms through which platform-provided resources influence the development of organizational capabilities by SMEs. In particular, the study reveals three learning-enabling mechanisms: experience accumulation, socialization, and acquisition of codified knowledge, as well as three learning-inhibiting mechanisms: accumulation of defective knowledge, acquisition of bounded knowledge, and limitation in learning processes.
The second study focuses on the lack of a specific type of capabilities amongst SMEs, namely marketing capabilities. SMEs increasing attempt to acquire marketing capabilities by leveraging on transaction platforms. However, there has been little research on the role of platforms in the development of marketing capabilities amongst SMEs. In this study, I draw on a qualitative field study of 19 retail SMEs in Singapore to develop a theoretical framework that furthers our understanding of this role. The findings indicate that SMEs leverage platform's features, activities, and status in the market, to develop five key marketing capabilities, namely product pricing, market information management, marketing communication, planning, and implementation. However, they also indicate that platforms can hinder the development of marketing capabilities by providing inaccurate data, restricting the use of communication channels between SMEs and customers, and controlling participation in the platform's marketing campaigns. Yet, the dominant perception amongst the SMEs in the study was that joining platforms improved their sales levels and survival prospects.
In the third study, which is still in early stages of development, I draw on resource dependence theory to investigate the power dynamics between SMEs and the platform. Since the platforms possess resources that generate network effects and reduce transaction costs, SMEs become dependent on the platform in conducting their business activities. In this relationship, the platforms have significant power over SMEs. To investigate the nature of this power, I conducted an exploratory qualitative field study across 23 retail SMEs who depend on an e-commerce platform for large parts of their business. The initial findings reveal different ways in which power manifests in the platform-SMEs relationship, as well as various strategies that SMEs use to counter the power of platforms. In conclusion, in this thesis proposal I attempt to present the dual effect of transaction platforms when adopted by SMEs and the extent to which they enable them to compensate for their lack of resources by developing platform-dependent capabilities..