Originally published in SSRN with research sponsored by Meta Platforms and supported by Keystone Strategy.
Abstract. This paper explores digital ecosystem innovation through a study of Facebook’s evolution. It focuses on the platform’s boundary resources, that is, the interfaces, shared technology tools, and rule systems that shape and govern the platform relationships with third-party developers, advertisers, and businesses. The empirical study analyzes 1,215 posts from Facebook’s public blog called “News for Developers” in the period 2006 to 2021 that communicate changes in the platform’s boundary resources to third parties. The results of the study indicate that Facebook has evolved from a social networking site focused primarily on providing features to end-users and with limited offerings to third parties, to a complex ecosystem that currently provides a variety of resources to external developers and businesses. The papers finds that the growing variety and specialization of boundary resources together with Facebook’s shift toward a rule-based ecosystem governance has brought about the emergence of new complementary interactions among ecosystem members that have been structured and carried out through data. These specific types of data synergies, or data complementarities, in turn led to increased diversification of offerings and to the establishment of innovative services and new businesses.
Keystone recently spoke with Professor Alaimo to hear her thoughts on the research. Read below for what she said:
What was the initial impetus for the research, sponsored by Meta Platforms?
The idea that we need to better understand how platform ecosystems innovate and create value. Albeit ecosystems are fundamental actors in the digital economy this process is still not well understood. I decided to focus on the role that tools such as interfaces, shared technology tools and regulations have in facilitating platform ecosystems innovation. These tools are called ‘boundary resources’ because they are offered by platforms to aid the work of external developers and business partners. Then I looked at how boundary resources enabled synergies among actors which, over time, led to the establishment of innovative services and new businesses.
How does this research connect to other platform ecosystems?
The innovation capabilities of platform ecosystems are supported by the breadth of technological tools and community rules the platform can provide over time to all its ecosystem actors. Studying Facebook’s evolution gives us important clues about other platform ecosystems. Similarly to other platform ecosystems, on Facebook, the provision of boundary resources has been constrained and enabled by a dynamic interplay between the platform’s strategic initiatives, broader technological changes, emerging risks, and the continuous changing needs and capabilities of its complementors. Understanding the interplay of these elements over time is essential to understand how platform ecosystems emerge, are structured, and evolve.
What is the main takeaway of each period and/or the overall evolution?
Facebook evolved from a social networking site offering solely few tools to external parties to a complex ecosystem that provides services and tools to many different business partners and developers. The first period (2006-2010) illustrates how it established user interaction on the platform and the initial support for external developers. Things started to change during period two (2011-2014) when Facebook experienced a massive growth facilitated by the provision of the Graph API and the Open Graph Protocol which allowed third-party to interoperate with Facebook’s social graph. In period 3 (2015-2017) the resources became more domain-specific, more specialized. This is the period in which relations among actors are structured into patterns, showing the emergence of the ecosystem. In the final period (2018-2021) Facebook ecosystem reached maturity, integrating services and existing resources, investing in open source, and changing its governance approach by deprecating app permission and tightening existing control systems across business domains.
The main takeaway is that the increased specialization and diversification of Facebook’s boundary resources, together with the shift in its platform governance toward a more regulated approach, contributed to the emergence of “data complementarities”. They are new complementary interactions between Facebook and the actors in its ecosystem which are structured and carried out through data. These complementarities are very important as they lead to the establishment of innovative services and new businesses, which in turn create significant value for consumers and the ecosystem economy at large.
What’s next for this research?
Next steps are to dig more into some of the most interesting findings of this research! We found that the role of boundary resources and of governance, to mention just one aspect, is essential to innovation and value creation. We need of course to do more research. Further studies can delve into understanding the specific ways in which third-party businesses and developers leverage platform’s resources or can look at how platform’s boundary resources are shaped by the changing needs of external actors and outside innovations. Albeit this kind of research is still in its infancy, it promises to be very relevant for academics, practitioners, and regulators as well.
Cristina Alaimo is Assistant Professor (Research) in Digital Economy and Society in LUISS University, Rome, Italy. She holds a PhD in Management, Information Systems and Innovation from The London School of Economics and Political Science, UK. Her research focuses on the innovation brought about by data-based services and their consequences for organizations and society. Cristina’s work has been published in journals such as Organization Science, Organization Studies, Journal of Management Information Systems, The Information Society, Journal of Information Technology, and Research in the Sociology of Organizations.