| Summary: |
This paper addresses the implications of digital platforms for middle-income countries seeking to build advanced productive capabilities. To do so it develops a new ‘Digital Platform Dynamics’ framework to consider platform functions and platform power in value creation and value extraction along with the potential roles for regulation, competition and industrial policies. The highly heterogeneous nature of digital platforms is considered along with the ways in which value is created and extracted, drawing from international competition cases and inquiries. The framework is developed from a review of the economics of digital platforms and the key development challenges facing countries in overcoming a ‘middle-income technology trap’. To build on local productive capabilities, countries have to link into global value chains, where digital platforms are increasingly important in keeping pace with technological developments, while linking back to local production systems to ensure that dynamic efficiencies are realised. We argue that this requires an ‘entrepreneurial-regulatory state’ to engage with the power and potential of the global digital platforms. The issues identified are considered in the case of South Africa drawing on an established research base on the effects of digitalisation and the importance of platforms in different sectors. We find that South Africa has established competition authorities and industrial capabilities, along with local digital platforms, however, it is grappling with an integrated strategy which aligns competition, regulation and industrial policies for value creation and capture in support of local economic activity. The South Africa sectoral cases highlight the relevance of the Digital Platform Dynamics framework in governing and capturing opportunities from digital platforms in processes of digital industrial development.
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