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Institutional Overlap:
Platform Rules and Government Regulation
Wesley Wu-Yi Koo
June 2019
Institutions & Institutional Constituents
Institutions: structures that govern the behavior of individuals & organizations; rules that constrain opportunism and facilitate exchange (Scott 1987).
An institutional constituent supports an institution and exerts conformity pressures on market actors (Oliver 1991, 1992).
Institution
Constituent
Theoretical Puzzle
Theoretical Puzzle
Theoretical Puzzle
Institutional
Overlap
Theoretical Puzzle
Institutional
Overlap
Theoretical Puzzle
vs.Institutional
Overlap
Research Question
How do market actors respond to institutional overlap?
BACKGROUND
Government Regulation & Digital Platforms
Government Regulation & Digital Platforms
Government Regulation & Digital Platforms
Institutional Overlap
• Both the private constituent (the platform) and the public constituent (the government) can regulate seller behavior.
• Institutional overlap: both constituents exert a similar institutional demand on sellers (e.g., “protect data privacy”, “don’t sell counterfeits”).
Chinese Government & Digital Platforms: Censorship
Chinese Government & Digital Platforms:Censorship
Chinese Government & Digital Platforms:Consumer Rights Protection
Chinese Government & Digital Platforms:Consumer Rights Protection
• Worked with Alibaba & JD to crack down on counterfeit products.
• Incentive differences between local and central governments.
• 13th Five Year Plan: to develop standardized regulations for digital platforms and the “new economy”.
Research Question
How do market actors respond to institutional overlap?
institutional overlap = platform regulation X government regulation
HYPOTHESES
Research on private regulation
• Private constituents can provide and enforce private regulations, e.g. platform rules, to constrain opportunistic behaviors by market actors (Büthe 2010; King &
Lenox 2000).
• A legal/government presence in private regulations generally creates more coercive power (Oliver 1991).
• Example: INPO and NRC’s monitoring of nuclear power plants (Rees 1997; Reid & Toffel 2009).
H1. Relative to platform-only rules, platform rules with government regulation will be associated with a lower transgression tendency among sellers.
seller
transgression_
government
regulation in
platform rule
Rule details
• When facing a detailed issue, actors are likely to use simplified mental models to guide thinking (Gary & Wood 2011;
Gavetti & Levinthal 2000).
• Popular mental models associated with the government: incompetence and technological inadequacy to work with technology (Malesky & Taussig 2017; Nye 1997; Pasquale 2015).
—> For complex platform rules, the negative perceptions of the government will be accentuated in the minds of sellers.
H2. The mitigating effect of government regulation on seller transgression will be less pronounced for highly detailed rules.
seller
transgression_
government
regulation in
platform rule
rule details
_
METHODS
Survey Experiment
Online questionnaire answered by 3,000 Chinese e-commerce sellers in December, 2017.
Six different vignettes (500 seller respondents per vignette) systematically vary the description of the platform rule to elicit sellers’ responses.
Advantages of a survey experiment (Atzmüller & Steiner 2010; Finch
1987): • embed respondents in a realistic context;• high internal validity;• manipulation of multiple layers of treatments, e.g.
government regulation & rule complexity.
Survey Experiment
low
complexity
moderate
complexity
high
complexity
with gov.
regulationVignette A Vignette B Vignette C
without gov.
regulationVignette D Vignette E Vignette F
Survey Experiment
with government regulation
without government regulation
Survey Experiment
high details
Survey Experiment
Measures: Outcome Variable
A seller’s transgression tendency:
Measures: Predictors
Treatments/manipulations:
• GovReg: Read platform rule mentioning government regulation
• Rule Complexity: low, moderate, high complexity.
Control Variables:
• Seller Age, Seller Gender (1=male, 2=female), Seller Education.
• Store Monthly Sales (ordinal), Store Age.
• Whether seller has Worked in Government before.
• Urban-ness of store location.
• Product Category fixed effects, Prefecture fixed effects.
Model Specification
RESULTS
Government regulation ~ less transgression
Government regulation ~ less transgression
DV =
Switch Products
DV =
Switch Part of
Products
DV =
Subpar
Quality
DV =
Non-existent
Product
DV =
All OK
DV =
None OK
log(Age) 0.439
(0.397)
0.394
(0.363)
1.011**
(0.409)
0.847**
(0.399)
1.381***
(0.392)
-1.186***
(0.245)
Gender -0.747***
(0.158)
-0.518***
(0.142)
-0.485***
(0.161)
-0.702***
(0.158)
0.578***
(0.163)
0.254***
(0.098)
Sales 0.075
(0.061)
0.169***
(0.057)
0.209***
(0.064)
0.247***
(0.061)
-0.299***
(0.066)
0.010
(0.039)
Store Age -0.035
(0.032)
-0.033
(0.029)
-0.074**
(0.034)
-0.089***
(0.033)
0.023
(0.029)
0.028
(0.019)
Worked in
Government0.670***
(0.232)
0.534**
(0.221)
0.907***
(0.227)
0.666***
(0.227)
0.710***
(0.248)
-0.685***
(0.163)
GovReg-0.341**
(0.146)
-0.305**
(0.135)
-0.260*
(0.151)
-0.384**
(0.146)
0.066
(0.152)
0.224**
(0.093)
Logistic regressions. Two tailed tests: *p<0.1; **p<0.05; ***p<0.01. Standard errors in parentheses.
Rule details dampen the benefit of government regulation
Rule details dampen the benefit of government regulation
DV =
Switch
Products
DV =
Switch Part
of Products
DV =
Subpar
Quality
DV =
Non-existent
Product
DV =
All OK
DV =
None OK
All controls Yes Yes Yes Yes Yes Yes
GovReg -0.341**
(0.146)
-0.305**
(0.135)
-0.260*
(0.151)
-0.384**
(0.146)
0.066
(0.152)
0.224**
(0.093)
High Details -0.271
(0.251)
-0.317
(0.224)
-0.543**
(0.257)
-0.562**
(0.246)
0.072
(0.267)
0.208
(0.159)
High Details X
GovReg
0.490
(0.369)
0.749**
(0.325)
0.966***
(0.364)
0.835**
(0.362)
-0.012
(0.372)
-0.507**
(0.227)
Logistic regressions. Two tailed tests: *p<0.1; **p<0.05; ***p<0.01. Standard errors in parentheses.
IMPLICATIONS
Theoretical & Policy Implications
Institutional overlap:
• Having the support of multiple constituents has nuanced effects; additional support could hamper an institution.
A new approach toward platform regulation:
• Depending on the circumstance, a platform should purposively highlight/hide the role of government regulation.
AsiaEurope Middle East| |
Appendix
• Mechanism: general incompetence vs. technological inadequacy
• Evidence from panel data: police-Taobao joint operation.
Mechanism: general incompetence vs.technological inadequacy
Coefficients on High Details X
GovReg
Switch
ProductsSwitch Part
Subpar
Quality
Non-existent
Products
Sellers who were
entrepreneurs offline
(N = 658)
-0.494
(1.144)
1.822**
(0.891)
1.113
(1.004)
1.944**
(0.974)
Sellers who were not
entrepreneurs offline
(N = 2,342)
0.424
(0.415)
0.668*
(0.383)
0.899**
(0.416)
0.631
(0.428)
Sellers who worked in IT
(N = 1,016)
0.633
(0.725)
1.751***
(0.597)
0.907
(0.671)
1.148*
(0.617)
Sellers who did not work
in IT
(N = 1,984)
0.319
(0.485)
0.334
(0.451)
0.910*
(0.472)
1.038**
(0.515)
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When there is real enforcement threat:police-Taobao joint operation in 2014
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