Platform Regulation: Shaping regulation to your advantage

How can platforms build industry standards and influence future regulation in their favor?

This article is part of the Digital Platforms hub

Platforms often operate in market conditions which are not fully regulated. In addition to responding to regulation, platform firms can proactively shape the regulatory environment to their benefit. Standards development is a common approach which platform firms use to proactively shape the industry and regulatory environment. Standards are specifications that determine the compatibility of different technological components and increase the ability of firms to coordinate their activities, leading to greater coordination across the industry value chain. Greater usage of the standard leads to superior inter-firm coordination, driving further adoption of the standard. This eventually leads to “winner-take-all” outcomes where a single standard may dominate. 

Platform firms often engage in open standards development when entering a new industry. Open standards development may help change the competitive dynamics in an industry by commoditizing incumbent advantages. In the healthcare industry, incumbents – particularly EHR (electronic health record) vendors – resist interoperability to maintain a stranglehold over patient data and operate a closed partner ecosystem around it.