Reshaping Internationalization Strategy and Control for Global E-Commerce and Digital Transactions: A Hayekian Perspective.

Date01 Febrero 2023
AuthorCha, Hongryol

1 Introduction

In the rise of new e-commerce based on a digital economy, international business (IB) researchers and policymakers have some critical debates on the necessity of internationally harmonized e-commerce policies at the global, national, and transactional levels. Here, e-commerce (i.e., electronic commerce) transaction is explicitly defined as "the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders" (OECD, 2011). Since the first discussion on e-commerce initiated at the World Trade Organization (WTO) in 1998, many critical issues, such as customs duties on electronic transmissions, plurilateral market-access information technology, and trade-related aspects of intellectual property rights, have been discussed so far, most recently, at the 11th Ministerial Conferences (MC11) in December 2017 (Ismail, 2020).

However, detailed discussions promoted by WTO on e-commerce have not yet made significant progress in establishing global rules for plurilateral e-commerce for almost 20 years, from the first discussion in 1998 until MC11 in 2017 (Ismail, 2020). The lack of global rules and norms for the digital economy is problematic, particularly, for the internationalization of such a digital platform-based business. This is due to the different views of the internet regimes in different countries (Fefer, 2020). For example, the United States (US) takes a market-driven approach to an open and reliable internet system. Rather, the European Union (EU) has a slightly stronger focus on prescriptive regulation in an internet system than the US. In contrast to the views of the US and EU, China pursues a state-led approach to tight control over the internet environment.

IB scholars have explored the theoretical issues on how to promote the sustainable growth of e-commerce. Singh and Kundu (2002) extended the eclectic paradigm framework by adding the network-based advantages, so-called N-OLI (network, ownership, location, and internalization), to explain how network brokerage positions affect the internationally sustainable growth of e-commerce. More recently, Agarwal and Wu (2015) reviewed multiple IB-related theories, including transaction cost economics, resource-based view, N-OLI, institutional theory, and entrepreneurship theory, and applied these theoretical foundations to propose the extensive framework for e-commerce policies. Considering the recent meta-analysis study shown the overall positive impact of internationalization on multinational enterprise's performance (Wu et al., 2022), IB scholars would keep extending attention to the internationalization of new business forms with e-commerce beyond the traditional approach. Notably, in the context of the rise of new e-commerce businesses, the sharing economy that exploits the underutilized assets of business ecosystem partners has altered organizing multinational businesses from arranging internal resources and capabilities economically to leveraging digital platforms to organize digitalized business ecosystems with autonomous actors (Parente et al., 2018).

Although there are enough discussions on the rise and growth of various e-commerce firms, the assumption behind these studies is that e-commerce policies are well established and harmonized so that firms can focus on market strategies. Indeed, the scholarly interests in e-commerce policies have been relatively limited because the earlier form of e-commerce focused on the import and export of products subject to general trade and customs rules. This approach based on favorable e-commerce policies is no longer appropriate for sharing economy firms that provide various services in different countries where the regulatory institutions are quite different and that need nonmarket strategies to penetrate foreign markets (Parente et al., 2018). In particular, we know little about the theoretical mechanism of internationalization for the sharing economy under the divergence of global e-commerce policies in different countries. As such, this paper aims to develop an internationalization theory for the sharing economy firms that should adapt to this prominent context of the lack of well-harmonized global e-commerce policies and facilitate digital platform-based transactions between different countries. Specifically, we ask: How can the divergence of global e-commerce policies affect the internationalization of the sharing economy firms across different countries?

With regard to adapting to institutional complexity, current IB research has highlighted firms' global strategies from the perspective of the N-OLI framework based on existing network advantages (e.g., Broufhers et al., 2016; Chen et al., 2019; Singh & Kundu, 2002). However, this core-periphery network model offers a relatively limited view to addressing our research question because sharing economy firms are characterized by their openness to form extensively growing business ecosystems over time (Parker & Van Alstyne, 2017) and their asset-lightness to organize multinational business without ownership-based hierarchical relationships (Kachaner & Whybrew, 2014). In other words, the openness and asset-lightness of the sharing economy firms contradict the central premises of extant theories that emphasize the central role of headquarters to internalize strategic resources and capabilities for internationalization (Cha, 2020). Therefore, we need a new and comprehensive approach to analyzing how the divergence of global e-commerce policies can affect the internationalization process of sharing economy firms over time.

To address this question, we build on the ideas of platform ecosystems in the fields of strategic management (Adner, 2017; Gawer & Cusumano, 2014; Jacobides et al., 2018) and network economics (Katz & Shapiro, 1985; Parker & Van Alstyne, 2005; Rochet & Tirole, 2003) to theorize on the internationalization process of the sharing economy firms. By doing so, this study promises to contribute to IB research on the issues of e-commerce policies in several ways. First, we draw attention to the emerging challenges of sharing economy firms that want to quickly penetrate foreign markets despite the different institutional and regulatory issues in different countries. The fast penetration of global sharing economy firms through digital platforms has provoked an unpredictable backlash, such as emergent regulation and restrictions of business models, from the institutional environment designed to protect domestic markets, labors, and other social security in host countries. This study focuses on the internationalization process of such sharing economy firms that face regulatory barriers across different countries due to the divergence of global e-commerce policies. Next, we incorporate the current IB research on platform-based firms' internationalization strategies (e.g., Brouthers et al., 2016; Chen et al., 2019; Stallkamp & Schotter, 2021). In this stream of IB research, we focus on addressing how the sharing economy firms' primary attributes, such as advantages from digital platform-based transactions, affect their internationalization, in contrast with traditional MNEs. Finally, for a new insightful approach to the unsolved issues of the sharing economy firms regarding the divergence in global e-commerce policies, we set a new boundary assumption and advance our knowledge about how digital platform-based transactions affect the sharing economy firms' internationalization. Instead of Coase's (1937) approach to hierarchical and economic organizations for traditional MNEs, Hayek's (1945, 1988) propositions on dynamics in the knowledge economy may provide a fertile ground to construct a new theory of the sharing economy with a new boundary assumption (Cha, 2020). In contrast to current IB theories, our model highlights the ecosystem-specific advantages of sharing economy firms (i.e., operating business through business ecosystems beyond the boundary of the firm), contrasting to the traditional focus on the firm-specific advantages.

2 Conceptual Background

This section offers a conceptual background in theorizing on the essential components of the internationalization process for the sharing economy firms. We first conceptualize transactions based on digital platforms, comparing them with the three types of transactions in traditional relationships, such as markets, hierarchies, and social embeddedness. In doing so, we establish the boundary condition for theorization on digital platform-based transactions from the Hayekian approach. We then describe the various business models of the sharing economy in a traveler accommodation industry, a transportation industry, and a finance industry to understand the attributes of the sharing economy in divergent regulatory environments.

2.1 The Attributes of Digital Platform-Based Transactions from the Hayekian Perspective

The notions of platform and ecosystem are essential in understanding the sharing economy firms that organize exponentially growing and scalable business ecosystems through digital platforms. In the field of strategic management, an ecosystem has been considered as "an economic community" supported by interacting organizations and individuals, including suppliers and other stakeholders (Moore, 1996), or a "meta-organization" that consists of multiple legally autonomous entities (Gulati et al., 2012). In general, Jacobides et al. (2018) define an ecosystem as "a set of actors with varying degrees of multilateral, non-generic complementarities that are not fully hierarchically controlled." Also, industry-level platforms are defined as "products, services, or technologies developed by one or more firms, and which serve as foundations upon which a larger number of firms can build further complementary innovations and potentially generate network effects" (Gawer & Cusumano, 2014, p. 420)...

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