Introduction
In today’s digital economy, it is impossible to ignore the impact of platform business models such as the Google Play Store, Apple’s App Store, Hotels.com, and Booking.com. These platforms influence not only individual economic activities but also reshape broader regional innovation systems (RISs).
This article analyzes the dynamics of platform business models and their effects on regional development. It addresses three key research questions:
- What factors and structures influence the dynamics of platform business models?
- How can these dynamics be described in industries such as app stores and hotel-booking platforms?
- What are the effects of platform business models on regional development?
Research Scope and Method
This study focuses on two types of platforms: smartphone app store platforms (Google Play and Apple’s App Store) and hotel-booking platforms (Hotels.com and Booking.com). These platforms were selected because they are representative leaders in their respective industries and have significant influence on regional economic activity.
A combination of qualitative and quantitative methods was employed, including interviews, brainstorming sessions, literature reviews, simulations, and statistical analysis. Interviews were conducted with industry professionals and regional stakeholders in major Korean cities. Using insights from these interviews, causal loop and system dynamics models were developed and validated.
An Analytic Hierarchy Process (AHP) was used to assess the degree of openness between suppliers and users, supported by intensive brainstorming among co-authors familiar with the software and hospitality industries. Statistical analyses were then conducted to evaluate the impact of platform business models on regional development.
Literature Review
Open Innovation and Platform Business Models
Open innovation (OI) theory highlights how sharing technology with external developers stimulates broader innovation. Platforms enable firms to combine internal and external innovations to generate value across the supply chain. High-tech industries increasingly rely on such platforms, where platform owners manage ecosystems composed of interdependent participants.
Two main approaches to platform openness exist: one grants access to complementary markets, while the other cedes control to enable collaborative innovation. Each involves a balance between diversity and control. Studies show that leading platform owners use various control mechanisms—market regulation, co-regulation, restriction, sanction, motivation, and information—to guide innovation within their ecosystems.
Examples such as smartphone app stores and hotel-booking platforms demonstrate how platform-based innovation drives industrial transformation. App stores enable vast ecosystems of developers and users, while online booking platforms use customer feedback and reputation systems to enhance service quality and competitiveness.
Open Business Model Platforms in Regional Innovation Systems
An open business model (OBM) platform operates as a form of entrepreneurial ecosystem within a regional innovation system. By connecting multiple actors—suppliers, customers, and intermediaries—OBMs create new pathways for innovation and regional competitiveness.
Regional innovation systems (RISs) consist of key components such as financing structures, systems of learning and innovation, and supportive institutional cultures. OBM platforms fit within the systemic learning dimension, fostering collaboration, experimentation, and new business formation.
Through “constructed advantage,” OBMs enable regions to build innovation capabilities that extend beyond local boundaries, enhancing their economic resilience and global integration.
Research Framework
The research framework identifies three main components of a platform firm: the supplier platform, the customer platform, and industrial characteristics. The supplier platform enables supplier-based open innovation, while the customer platform allows external firms to co-create value through an open business model. Industrial characteristics define how these interactions manifest differently across sectors.
This framework serves as the foundation for analyzing how openness toward suppliers and customers influences the overall value of a platform and its contribution to regional development.
Analysis of Platform Dynamics
Smartphone App Store Platforms
Apple’s App Store and Google Play exhibit similar openness toward users but differ in supplier openness. Apple’s model emphasizes quality control and restrictiveness, leading to higher app quality but fewer apps overall. Conversely, Google’s open-source approach allows greater supplier participation, producing a larger number of apps but with more variation in quality.
These differences reflect trade-offs between openness and quality. When openness strongly influences supplier quantity, open innovation models (like Android’s) perform better. When quality and control dominate, closed innovation models (like Apple’s) may be superior.
Hotel-Booking Platforms
Hotels.com and Booking.com display contrasting openness toward users. Booking.com allows greater user freedom and direct interaction between hotels and customers, fostering rapid user growth but reducing direct revenue control. Hotels.com, with more restricted user interaction, maintains higher revenue collectability but slower user growth.
This trade-off demonstrates that open business models thrive when increased user engagement outweighs revenue collection challenges, while closed or hybrid models may perform better when financial control is prioritized.
Industry Characteristics and Key Influences
Technological capability and user trust are two critical determinants of platform success. Technological capability affects supplier quality and innovation potential, particularly in hardware and software industries. In contrast, user trust is more crucial in service industries, where customers rely on reviews and peer experiences to assess quality.
Industry comparisons show that technological capability is most vital in hardware, followed by software and service sectors, while user trust follows the reverse pattern—most important in services, then software, and least in hardware.
Simulation of Platform Business Models
In the Korean context, simulations showed that Apple’s App Store achieves higher revenue collectability due to superior technological standards and strong user trust. Conversely, Android’s greater openness attracts more developers but sacrifices control and monetization. However, reducing customer openness slightly could significantly improve profitability for Android-based platforms.
In the hotel industry, Booking.com’s high customer openness attracts more users, while Hotels.com’s stronger supplier openness supports better relationships with hotels. Simulations revealed that if Hotels.com increased customer openness, it could retain competitiveness against Booking.com, aligning with the company’s recent strategy to lower commissions and allow direct hotel payments.
Regional Development Effects
Platform-based business models have played a transformative role in regional innovation systems by encouraging entrepreneurship, collaboration, and cross-industry convergence. They promote diversification, support the growth of new digital enterprises, and help traditional sectors such as hospitality and tourism adapt to globalized competition.
By integrating suppliers and users into shared digital ecosystems, platforms stimulate learning, enhance efficiency, and expand market reach. This dynamic fosters a transition from hierarchical industrial structures to distributed, network-based innovation ecosystems across multiple regions.
Conclusion
The platform business model functions as a dynamic entrepreneurial ecosystem that reshapes industries and regional economies. By fostering openness, co-creation, and digital connectivity, platform-based ecosystems enhance regional innovation capacity, diversify local economies, and promote global competitiveness.
However, the balance between openness and control remains critical. Excessive openness can reduce quality or profitability, while too much control can limit participation and innovation. Ultimately, the growth of platform business models—whether in digital software ecosystems or service industries like hospitality—illustrates the profound ways in which digital platforms drive regional transformation and sustainable economic development.
As the author and service provider, I, Anushka Driessen, am pleased to have contributed to the refinement and synthesis of this research. My involvement focused on enhancing the analytical depth of the study, particularly in interpreting the dynamics between open business models and regional innovation systems. Through careful review, constructive feedback, and collaborative engagement, I aimed to strengthen the study’s clarity, coherence, and contextual understanding. The completion of this article reflects my dedication to supporting rigorous, insightful, and impactful research in the field of digital business model innovation.
For those seeking expert guidance in this area, I invite you to take services from me, Anushka Driessen, a certified digital business model expert committed to delivering strategic insights and practical solutions tailored to your business needs.
