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 CORPORATE GOVERNANCE, DIGITAL PLATFORMS AND NETWORK THEORY:
INFORMATION AND RISK-RETURN SHARING OF CONNECTED STAKEHOLDERS

Roberto Moro Visconti1

Abstract
Digital platforms are a technology-enabled transactional tool that facilitates connections between stakeholders. Their characteristics
are consistent with network theory applications where stakeholders are the nodes rotating around the platform. Platforms may be
considered a new virtual stakeholder that, consistently with network theory, connects conventional partners (shareholders, managers,
employees, lenders, clients, suppliers, etc.), representing a bridging node and edge in multilayer networks. Stakeholders are nodes
that interact around the bridging (hub) node, sharing information, and co-creating value within a sustainable digital ecosystem.
Shared information is fueled in real-time by big data and reduces asymmetries and risk, redesigning information systems. Corporate
governance and managerial implications emerge as a critical, still under-explored issue.

Keywords: Digital Information Systems - Scalability - Ecosystem - Digital Governance – Multilayer Network - Sustainability

1. Introduction

Platforms are facilitators of exchange (of goods, services, and information) between different types of stakeholders
that could not otherwise interact with each other. Transactions are mediated through complementary players that share
a network ecosystem (Rochet and Tirole, 2003; Armstrong, 2006). Due to their digital characteristics, they have a global
outreach that gives them the potential to scale.
Digitalization is the process of converting data (not necessarily information) into a computer-readable format. Digital
platforms are “software-based external platforms consisting of the extensible codebase of a software-based system that
provides core functionality shared by the modules that interoperate with it and the interfaces through which they
interoperate” (Tiwana et al., 2010). Software platforms represent a technological meeting ground where application
developers and end-users converge (Evans et al., 2006).
Digital technologies imply homogenization of data, editability, reprogrammability, distributedness and self-
referentiality (Yoo et al., 2010; Kallinikos et al., 2013). Such features can lead to multiple inheritances in distributed
settings, meaning there is no single owner that owns the platform core and dictates its design hierarchy (Henfridsson et
al., 2014).
A taxonomy of the platform typologies is recalled in Figure 1.

Figure 1 – Platform Taxonomy

Transaction platform Integrated platform Innovation platform

(digital matchmaker) • combines features of • technological enabler of
transaction and a common standard
• facilitates online buying innovation platforms ecosystem / technology
and selling framework
• examples: Apple, Google,
• eCommerce B2B / B2C Alibaba •third parties interact to
transactions develop complementary
• examples: products and services
Amazon, Airbnb, Uber, • example: Microsoft
AirBnB, Baidu

An analysis of the impact of digital platforms on corporate governance mechanisms can be conducted by first
defining the core components of this architecture (digital platforms, stakeholders, and networks) and then fine-tuning
some core findings in specific industries.
Digital platforms are at the basis of technology-enabled business models that facilitate exchanges between multiple
groups – such as end-users and producers – who do not necessarily know each other. The generated value is proportional

1
Università Cattolica del Sacro Cuore, Milan, Italy. Correspondence: [email protected].
to the size of the community, with scalable network effects thanks to Internet connectivity. Interaction within digital
platforms follows innovative paradigms where stakeholders co-create and share value. Supply and value chains flatten
and incorporate learning curves (economies of experience) that are fueled by real-time big data.
Traditional stakeholders (shareholders, managers, employees, suppliers, financial lenders, customers, etc.) whose
interactions are examined by classic corporate governance literature are complemented by pivoting digital platforms
that represent a further “virtual” stakeholder.
The survey of Pedrini and Ferri, 2019 shows that stakeholder management is increasingly part of corporate activities,
and the rise of the internet, social networking, and big data have put more pressure on companies to develop new tools
and techniques to manage stakeholders online. This is consistent with this study, according to which Internet-connected
stakeholders increasingly use digital platforms (and related social networking) to interact, sharing big data.
The relationships among the stakeholders that interact around the digital platform may be eased by new intangibles
such as:
• Big (and small) data and IoT as input factors of decision-making;
• Collection, storage, and analysis of data through cloud computing, interoperable databases and artificial intelligence
patterns;
• Interaction with digital platforms with smartphones, tablets, notebooks, M-Apps;
• Validation of data through blockchains (that may be considered as a specific digital platform).

A comprehensive analysis of these interactions goes far beyond the scope of this study, which is limited considering
them as a facilitator for networking stakeholders.
Consistently with this framework, the research idea of this study is concentrated on the impact of digital platforms
on the networking stakeholders and their corporate governance interactions.
This paper is to the author’s best knowledge innovative, and it might cast light on the traditional governance
relationships, re-engineered around digital platforms. Implications for the sustainability and resilience of the supply
and value digital chains represent a promising research avenue.
The study is organized as follows: after these introductory notes, a literature review is contained in Section 2. Section
3 synthetically illustrates basic network theory concepts that in section 4 are applied to the theory of (networked) firms.
Section 5 considers the impact of networking scalability on a platform ecosystem, whereas section 6 is dedicated to
digital governance implications. Smart (digital) supply and value chain are then shortly examined in section 7, before a
discussion (section 8) that precedes some concluding remarks (section 9).

2. Literature review

Since the topic is highly interdisciplinary, a synthetic literature review will consider first separately and then jointly
the main streams that deal with each field, to find out how they can interact, and which are some possible research gaps.
The main subdivisions concern:

a) Network theory (applied to corporate governance and interacting stakeholders);

b) Digital platforms;
c) Networked digital platforms and related governance issues (with interactive and value co-creating stakeholders).

2.1. Network theory

Network theory (see Bapat, 2011; Barabási (2016), Caldarelli and Catanzaro, 2011; Erdős and Rényi, 1959; Estrada
and Knight, 2015; Jackson, 2008; Van Steen, 2010), is the study of graphs as a representation of either symmetric
or asymmetric relations between discrete objects. In computer science and network science, network theory is a part
of graph theory: a network can be defined as a graph in which nodes and/or edges have attributes (e.g., names). An
interdependent network is a system of coupled networks where nodes of one or more networks depend on nodes in other
networks.

2.2. Digital Platforms

A literature review on digital platforms is contained in Asadullah et al. (2019) and in Sutherland et al. (2018) that
analyze sharing economy platforms. Spagnoletti et al. (2015, p. 364) define a digital platform as “a building block that
provides an essential function to a technological system and serves as a foundation upon which complementary products,
technologies, or services can be developed”.
 Corporate Governance, Digital Platforms and Network Theory

Platforms are facilitators of exchange (of goods, services, and information). Transactions are mediated through
complementary players that share a network ecosystem (Rochet and Tirole, 2003; Armstrong, 2006).
Digital platforms are multisided digital frameworks that shape the terms on which participants interact. Digital
platforms are also complicated mixtures of software, hardware, operations, and networks (De Reuven et al., 2018; Gawer
and Cusumano, 2014; Gawer, 2014). They provide a set of shared techniques, technologies, and interfaces to a broad
set of users; social and economic interactions are mediated online, often by apps (Kenney and Zysman, 2016).
Digital platforms are complementarily defined as ‘‘software-based external platforms consisting of the extensible
codebase of a software-based system that provides core functionality shared by the modules that interoperate with it and
the interfaces through which they interoperate’’ (Tiwana et al., 2010). Software platforms represent a technological
meeting ground where application developers and end-users converge (Evans et al., 2006).
Digital businesses are those which carry out transactions that are digitally mediated or involve products or services
that are experienced digitally (Weill and Woerner, 2013). The term “Digital Scalability” basically refers to the
application of the scalability concept by digital companies and devices, to optimize as much as possible digital circuits
and operations.
Digital business models are usually designed for rapid growth, and the recent advances in digital technologies
continue to create new possibilities to scale up to a global scale. Multi-sided platforms continue to disrupt long‐
established industries and have governance structures ranged from a very centralistic and autocratic organization to
a more split approach with an empowerment on the user side (the client). Besides, the accessibility varies from a high
degree of openness to detailed background checks users need to pass to participate in the platform (Schreieck et al.,
2017).
Digital platforms have become a major mode for organizing a wide range of human activities, including economic,
social, and political interactions (e.g., Tan et al. 2015; Kane et al. 2014). Platforms leverage networked technologies to
facilitate economic exchange, transfer information and connect people (Fenwick et al., 2019). Studies adopting this
view focus on the technical developments and functions that form the foundation upon which complementary products
and services can be developed i.e., building on the top of the technical core that a platform owner offers and facilitates
(Tiwana et al. 2010; Ghazawneh and Henfridsson 2015; Ceccagnoli et al. 2012).
Other studies have conceptualized digital platforms based on a non-technical view that presents platforms as a
commercial network or market that enables transactions in the form of business-to-business (B2B), business-to-customer
(B2C), or even customer-to-customer (C2C) exchanges (Tan et al. 2015, Koh and Fichman 2014, Pagani 2013).
3
Digital platforms may include crowdfunding and P2P stakeholders (Majchrzak and Malhotra, 2013) that represent
an innovative way to raising equity.

2.3. Networked Governance

Networked corporate governance originates from the interaction of network theory with corporate governance
principles. The topic has been illustrated in Fenwick et al. (2019) and Moro Visconti (2019), according to which this
connection is still under-investigated.
Networked governance, as it will be shown in Section 3, is consistent with a re-interpretation of the classic (Coasian)
theory of the firm (see Holmstrom and Tirole, 1989; Williamson, 1979).
Value co-creation patterns (Akaka et al., 2012; Beirão, et al., 2017; Blaschke et al., 2019; Ceccagnoli et al., 2012;
Galvagno and Dalli, 2014; Moro Visconti et al., 2017) exploit the network governance properties of digital platforms.

3. Network theory: a short introduction

A brief summary of some basic network theory concepts is useful for a better understanding of the workings of
(networked) digital platforms.
Networks are a fundamental characteristic of complex systems whose connected structure may give an innovative
interpretation of the interactions among (linked) stakeholders. Network theory has applications in many disciplines,
including statistical physics, particle physics, computer science, electrical engineering, biology, economics, finance,
operations research, climatology, ecology, and sociology. Applications of network theory include logistical networks,
the World Wide Web, Internet, gene regulatory networks, epidemiology, metabolic networks, social networks,
epistemological networks, etc.
Induction is a scientific methodology often used in network theory: what can be shown for small networks may be
intuitively extended to other networks (Estrada and Knight, 2015, p. 34). Pollination of well-established network theory
applications (e.g., physics, computer science, electrical engineering, biology, epidemiology, climatology, etc.) may well
address corporate governance issues with an interdisciplinary approach.
 Stakeholding nodes, as those depicted in Figure 5 are typically symmetric (i.e., bidirectional or undirected), and this
increases the informative and decisional value of the network, particularly when digital platforms are introduced, as
they directly mediate the relationships among other stakeholders.
A key property of each node is its degree: its number of links to other nodes. The degree is an important parameter
even in corporate governance, as it identifies the connections among stakeholders and their intensity.
In networks, physical distance is replaced by path length. A path is a route that runs along with the links of the
network. A path length is the number of links it contains. Even the shortest path can be important, considering (digital
or traditional) supply and value chains where each passage (or node) is presided by interacting stakeholders, who share
marginal economic returns (and bear corresponding costs), co-creating value. Physical distance plays a key role in
determining the interactions between the components of physical systems. In networks, distance is a challenging
concept, and physical locations coexist with digital links where geographical location is not an issue. One of the main
advantages of digitalization is that it minimizes time and space constraints.
In network science, paths play a central role. In corporate governance they represent the interactions between
stakeholders. Whereas traditional relationships among stakeholders typically occur through physical interaction,
networking follows the path length rule, and “digital” distances are typically negligible.
Connections are important as they enable interactions among stakeholders. Disconnections may happen in case of
failures or other value-destroying occurrences. In highly sensitive industries as healthcare, even temporary
disconnections may cause severe damages to patients. Digitalization is a double-edged sword, as it increases
connections, consequent possible disconnections, while also helping to fix them in real-time.
The clustering coefficient captures the degree to which the neighbors of a given node link to each other. Clusters are
relevant for interfirm coordination when companies cooperate within an industrial district, joint ventures or other forms
of cooperative competition - coopetition in shared markets (Klein et al., 2019). The degree of a node contains no
information about the relationship between a node's neighbors. Do they all know each other, or are they perhaps isolated
from each other? The answer is provided by the local clustering coefficient that measures the density of links in node
immediate neighborhood.
The concept of node centrality (Estrada and Knight, 2015, Chapter 14) is used in the determination of the most
critical nodes in a network, acting as hubs. They can communicate directly with other nodes, their closeness to other
nodes, and their role to act as a communicator between different parts of a network. Usefulness – and/perhaps
indispensability - of central nodes is fully consistent with the Coasian nature of the firm as a nexus (network) of contracts
and ties among composite stakeholders. Node centrality is also applicable to digital platforms due to their bridging
characteristics.
Degree centrality measures the ability of a node to communicate directly with others. This is of key importance in
firms, which also have a closeness centrality, having the shortest path distance with other nodes represented by
surrounding stakeholders. Furthermore, firms are characterized by their betweenness centrality that detects nodes that
serve as a bridge from one part of a graph to another. Closeness to other nodes is important even in terms of higher
influence.
Communities in networks (Estrada and Knight, 2015, chapter 21) represent an explanation of the organization of
nodes in complex networks. Communities are groups of nodes more densely connected amongst themselves than with
the rest of the nodes of the network. Communities may be represented by social networks that coalesce around the hub-
firm or the bridging digital platform, as it will be shown in Figure 5.

4. The Firm as a Coasian Network (Nexus) of Contracts

Digital platforms ease the interaction of networked stakeholders. An interpretation of the firm as a network (nexus)
of contracts is then useful to understand its relationship with the virtual digital agent.
The firm can be considered as a nexus of contracts both internally, justifying in a Coasian way its very existence,
and externally, considering agreements with third parties. This interpretation is fully consistent with the network theory
since nexuses are the links among different nodes (here represented by composite stakeholders, in a multilayer
framework).
Consider a situation where there is no firm to start with. Each node represented by a blue circle can have different
links with the others. Figure 2 shows an increasingly linked framework where the network (a) is initially empty (since
there are no links among the different nodes) and then becomes increasingly linked with more and more edges (b → c
→d).
 Corporate Governance, Digital Platforms and Network Theory

Figure 2. - Network (without a firm)

A different situation occurs when at the center of the “crossroad” among the different nodes there is a hub represented
by the firm. Nodes are increasing. In the situation represented by (e) in Figure 3, the hub is the only pivoting entity:
each stakeholder must pass through the hub to communicate with another node; in situation (f) or (g) nodes are also
(increasingly) linked among them, without necessarily passing through the hub.

Figure 3. - Network with a hub firm

From Figures 2 and 3, it intuitively appears that the hub/firm adds value to the whole network. This may be
considered a “graph-theory” interpretation of the theory of the firm.
Blockchains are likely to reshape networking interactions. The blockchain is a decentralized and distributed open
database with a pattern of sharable and unmodifiable data that are sequenced in chronological order. Due to their
decentralized characteristics, they can reduce the importance of concentrating (monopolistic) hubs. Governance
consequences are many: blockchains can help promote transparency, build trust and reputation, and enhance efficiency 5
in transactions, reducing information asymmetries and moral hazard (di Prisco, 2019).
Corporate governance structures and firms connected through digital platforms become decentralized, unmediated
and interconnected. Platforms leverage networked technologies to facilitate economic exchange, transfer information
and connect people (Fenwick et al., 2017). Networks are frequently horizontal, open and autonomous: the way
stakeholders interact is deeply reshaped, with disruptive governance consequences:
• vertical hierarchies (typical of family businesses or multinational firms) are replaced by sharing mechanisms;
• stewardship changes accordingly and is replaced by horizontal cooperation among interacting stakeholders;
• personalized consumer experience increasingly matters in unmediated transactions;
• relationships become flat and inclusive;
• peer-to-peer transactions replace traditional supply chain patterns.

Nexuses of contracts are also consistent with supply and value chains where stakeholders interact to co-create shared
value. External nexuses of contracts typically involve external stakeholders such as contractors. While stakeholders
always include shareholders, they also include debtholders, clients, suppliers, workers, and public authorities, up to the
external community.
Vertical integration represents a well-known form of networked cooperation, within the “make it or buy” strategic
decision that stands out as one of the basic elements of the theory of the firm, as illustrated by Williamson (1985),
Holmstrom and Tirole (1989), and Hart (1995, part I). In microeconomics, vertical integration describes a management
control system where companies within a vertical supply chain are controlled by a common owner. The specialization
of each firm within the vertical value chain allows a synergic combination of products and services, linking upstream
buyers with downstream suppliers.
The Coasian rationale behind the ontological existence of the firm, considered as a nexus of contracts, may
tentatively be extended to a wider framework where the firm is analyzed within its broader legal “web”; the internal
nexus of contracts may so be expanded to consider also external legal agreements. The firm is the “glue” that brings
together many heterogeneous stakeholders. The Coasian theory of the firm is linked to transaction economics. Ketokivi
and Mahoney (2017) make some key questions about the issue: “Which components should a manufacturing firm make
in-house, which should it co-produce, and which should it outsource? Who should sit in the firm’s board of directors?
What is the right balance between debt and equity financing? These questions may appear different on the surface, but
they are all variations on the same theme: how should a complex contractual relationship be governed to avoid waste
and to create transaction value? Transaction Cost Economics is one of the most established theories to address this
fundamental question”.
The concept of node centrality (Estrada and Knight, 2015, Chapter 14) is used in determining the most important
nodes in a network, acting as hubs. Their characteristics include the ability to communicate directly with other nodes,
their closeness to other nodes, and their role as communicators between different parts of a network. Usefulness – up to
indispensability - of central nodes is fully consistent with the Coasian nature of the firm as a nexus (network) of contracts
and ties among composite stakeholders.
The firm is seen as a contract among a multitude of parties (Holmstrom and Tirole, 1989) and this vision is consistent
with an interaction of networked stakeholders.

5. Networking effects and scalability of digital platforms

As anticipated in the introduction, the focus of this research is the impact of digital platforms on networking
stakeholders and their corporate governance interactions.
As summarized in Figure 4., the analysis considers digital platforms a network, pointing out how shareholders
interact to co-create shared value.

Figure 4 – From Digital Platforms to Network Governance

network
theory
digital
platforms

value co-
creating
stakeholders

network governance

Networks become more valuable and important if they increase in size and interconnections, following the Metcalfe’s
law according to which the effect of a telecommunications network is proportional to the square of the number of
connected users of the system (n2). Metcalfe's law (for critical analysis, see Odlyzko and Tilly, 2005) describes network
effects typical of communication technologies and networks such as the Internet, social networking, and the World
Wide Web. Metcalfe's Law expresses mathematically the number of unique possible connections in a network of nodes.
If a network is composed of n people and each of them assigns to the network a value proportional to the number of
other participants, then the value that all n people assign to the network is:
n * (n-1) = n2 – n [1.]
Digital platforms increase scalable profitability by offering exponential ecosystem growth. Scalability is an essential
feature of any business. It indicates the ability of a process, network, or system to handle a growing amount of work or
its potential to be enlarged to accommodate growth. It enables a growth in revenue accompanied by a less than
proportional increase in variable costs. Scalability is the ability of a device to adapt to a changing environment with
changing customer needs. In broader terms, scalability means flexibility (so incorporating real options to expand,
postpone, abandon businesses), which allows to better address and achieve specific needs of clients with a customer-
centric approach. People’s interests and tastes, as well as environmental conditions, evolve continuously. Scalability is
therefore vital as it contributes to competitiveness, efficiency, and quality (Moro Visconti, 2020). Scalability helps the
system to work without any delay and resource waste, making efficient use of available resources (Gupta et. al., 2017).
As described by Gander (2015), drivers of scale for digital business models are analyzed in Table 1.
 Corporate Governance, Digital Platforms and Network Theory

Table 1. - Scalability drivers

Scalability Features Criticalities
driver
The greater the scale of a Disseminate learning
technology (or “the wider between users may be
Learning the adoption of costly and may require
by technology”), the more its managerial attention and
using users learn about its resources.
features, strengths, and
weaknesses (using also
SWOT analysis).
‘Scalability becomes Risk of contagion through
supercharged with network the network. Examples
effects’ (Haskel and may derive from epidemics
Westlake, 2018). A occurrences.
Networking network is scalable if it can
(Network externalities) cope with the existing
demand placed upon it but
also can be flexibly
expanded to meet future
demand. Network
externalities occur when the
value obtained by using
products or services
increases with its greater
diffusion among
populations of users.

Supply-side effects of scale Conceive and maintain a

include economies of generic platform; resources 7
production and distribution. are required to hold non-
With large output scalable features away
quantities, the unit cost of from the ecosystem.
Scale each product or service
economies encounter falls due to the
spreading of fixed costs,
advertising budgets and
research and design costs
across a larger quantity of
products.
Reduction in user Conformity to general
perception of the risk of preferences for products
adopting a product or and services does not
Information service following its use by necessarily imply wider
returns others. The more widely a adoption, as individual
technology is adopted, the preferences can be
more it is understood. different.

The wider the adoption of Costly and complex to

technology, the greater the support as the number of
number of supporting product configurations
Technological interrelatedness technologies are developed grows with each customer.
and become part of its
infrastructure.
The way resources are congestion and consequent
decentralized across value bottleneck due to
chains and ecosystems. The overloading of capacity
distributed design enables following a rapid,
the rapid adoption of a unanticipated, and sizeable
 product or service without increase in user numbers,
Distributed sourcing sacrificing performance or which may result in service
causing bottlenecks in the failure.
system which degrades the
customer experience.
Economies in which Additional costs and new
products or services are know-how are required to
sold by emphasizing their switch from product to
Economies effects on people’s lives service/experience
of and actions to create orientation. Change of
experience ‘memorable customers’ customers’ expectations
experiences’. and managers’ strategies.

Options available to Difficulties in estimating

managers ranging from the exact value of real
Real business investment options.
options opportunities to tangible
assets or financial
instruments.
Specific techniques Disrupting startups can
allowing companies to exploit network
achieve massive scale at externalities to create
Blitzscaling high speed. digital monopolies. Sharp
increases in the volumes of
sales are not automatically
followed by economic
margin improvements.

6. Networked governance around digital platforms

Digital networks use a common integrating platform that acts as a pivoting (bridging) node which centralizes
information sharing and transactions. Innovation is continuously proposing new paradigms for value creation, reshaping
governance interactions.
As shown in de Reuven et al., 2018, digital technologies imply homogenization of data, editability,
reprogrammability, distributedness and self-referentiality (Yoo et al., 2010; Kallinikos et al., 2013). Such features of
digitality can lead to multiple inheritances in distributed settings, meaning there is no single owner of the platform core
who dictates its design hierarchy (Henfridsson et al., 2014). This suggests that digital platforms, with their socio-
technical features, may have “horizontal” characteristics with interesting corporate governance implications in terms of
value co-creation and sharing incentives. This feature is also consistent with the nature of distributed blockchains, where
secured data are created and shared by cooperating stakeholders.
Internal stakeholders (mainly shareholders, managers, employees) are the core part of the networked firm whereas
external stakeholders are customers, suppliers, financial institutions (banks) and other players (P2P investors;
competitors; partners, etc.). The firm may also be considered an “internal” platform (Gawer, 2014).
The digital platform is the bridging node between the firm and the external stakeholders (that may also have a direct
link with the firm, bypassing the intermediating function of the platform) and it can be linked to a digital supply chain
where suppliers interact with B2B transactions and e-Procurement.
Figure 5 shows a case where players (stakeholders) are interacting nodes.
 Corporate Governance, Digital Platforms and Network Theory

Figure 5 – Internal and External Stakeholders linked to the Firm and the Digital Platform

Customers

e-commerce / B2C
shareholders

Digital
digital
Platform supply
Networked chain
Firm
managers
B2B - eProcurement

suppliers
clustering triangular
networks of sub-suppliers
P2P

employees
other firms
banks (coopetition)

internal
stakeholders external stakeholders

The two bridging (hub) nodes represented in Figure 5 are the networked firm and the digital platform. Internal
stakeholders (shareholders, managers, employees, etc.) represent a cohesive ecosystem within the firm that is linked to
other external stakeholders (customers, suppliers, banks, interacting firms, etc.). These traditional internal and external
stakeholders are complemented by the digital platform that represents an innovative bridging node, linked also to P2P 9
lenders, and digitized supply chains, following B2B or B2C transactional patterns.
The digital supply chain represents a further bridging node between the digital platform, the traditional suppliers and
a further sub-network of e-suppliers that exchange information and trade in real-time (24 hours / 7 days a week).
Transacting agents fuel big data stored in the cloud that feed interoperable databases, with consequent artificial
intelligence interpretation (and possible blockchain validation).
The digital platform acts as an intermediating hub, increasing the number of nodes (vertices) but especially the
quantity and quality of the links. For instance, any interaction between two agents that is mediated through the platform
is digitally recorded.
A digital platform that mediates different groups of users (such as buyers and sellers) may be denoted as multi-sided
(Boudreau and Hagiu, 2009). In two-sided markets, two distinct groups have a relationship where the value for one
group increases as the number of participants from the other group increases (Evans, 2003; Eisenman et al., 2006). As
platforms bring together multiple user groups, they create the so-called network effects or network externalities (de
Reuver et al., 2018). This is consistent with the Metcalfe’s property of networks and with the interpretation of platforms
in networking terms.
The added value of the eco-systemic network mainly arises from two synergistic characteristics:

a) The “architectural” value of the network itself (depending on the outlay of the nodes and links), measurable in
numbers;
b) The functional value of the network (including the platform as a bridging node), which depends on the intensity of
the interactions among the different links (exchange of information; transactions, etc.). Architectural links matter to
the extent that they incentive “traffic” among nodes (stakeholders).

Smart products in combination with innovative data-driven supply chain services pave the way to rethinking supply
chain management, leading to more self-organizing and self-optimizing systems. Digitization, in general, will play an
increasingly important role in global supply chains due to several reasons such as the shift in values from the physical
artifact to the data created by smart products, the emerging importance of services, the displacement of industry borders,
the radical change of competitive structures, the transformation of business models and more in general the symptomatic
creative destruction of established structures and behavior patterns (Pflaum et al., 2017).
7. Digital (smart) supply chains

A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the
final buyer. Network theory is consistent with the architectural framework of the supply chain.
What makes supply chains resilient is:
● A mix of complementary intangibles (e.g., big data and IoT that fuel patented processes and artificial intelligence
applications stored in the cloud);
● A scalable network of expanding nodes and linking edges, incorporating growth real options, and B2B or B2C
relationships;
● Digital platform services (cloud computing platforms where customers can develop, run, and manage applications
without the requirement of building and maintaining the infrastructure typically needed when developing and
launching an app) (Butler, 2013).

Network theory is mainly related to digital platforms, which in turn represent a catalyzer of scalable intangibles.
The most powerful active platforms nowadays are Amazon, Apple, Google, and Facebook. Their common features are
to be rooted in equally powerful technologies not based on physical assets. They benefit from innovative ecosystems
that emphasize core interactions between platform participants such as consumers, producers, and third-party actors
(Jacobides et al., 2018).
Korpela et al. (2017) show that digital supply chain integration is becoming increasingly dynamic. Access to
customer demand needs to be shared effectively, and product and service deliveries must be tracked to provide visibility
in the supply chain. Business process integration is based on standards and reference architectures that should offer end-
to-end integration of product data. Companies operating in supply chains integrate processes and data through the
intermediating companies, who establish interoperability by mapping and integrating company-specific data for various
organizations and systems. This practice has high integration costs, and adoption is still low. Business to business (B2B)
integration within the supply chain refers to the exchange of electronic data over the internet between business partners
and value-added service providers.
The principal value drivers of digital supply chains are:
• Fast (just-in-time) end-to-end integration through digital enablers;
• Traceability and visibility of deliveries through smart logistics partners;
• Cost-effective cloud solutions provided by ICT partners;
• Sharing of real-time information stored in the cloud;
• Standardized transactions and collaboration through digital platforms accessed by supply chain members;
• Networking with geo-localized e-commerce customers.

Digital (smart) supply and value chain technologies combine information, computing, communication, and
connectivity innovation in applications or devices like:
• Augmented reality;
• Big data;
• Cloud computing;
• Social media;
• Mobile, (cognitive) analytics or embedded devices;
• Cognitive technologies (machine learning, neural networks, robotic process automation, NPL, AI, etc.);
• IoT, wearables and Sensor technology;
• Nanotechnology;
• Omni-channel (to improve customer experience);
• Robotics;
• Self-Driving Vehicles and Unmanned Aerial Vehicles;
• 3D printing.

The interactions among the networked firm, the digital platform, and the other external stakeholders can be examined
with a value chain analysis that outlines its networked and digital features. The value chain is digitized by the devices /
technologies reported above. An example is shown in Figure 6.
 Corporate Governance, Digital Platforms and Network Theory

Figure 6 – From Traditional to Networked Digital Value Chains

traditional value chain digital value chain

connectivity / interactivity

platform

isolated node isolated node

digitalization

Digital value chains tend to be flatter than traditional value chains and the bridging platform acts as a coordinating
hub. The digital network is intrinsically more valuable due to its highly interconnected architecture (higher number of
links); value also depends on the increasing traffic of data or transactions among the linked nodes.
Digital supply and value chains may be represented by two separated initially network ecosystems that eventually 11
interact, within a multilayer network (Bianconi, 2018). This interpretation is consistent with the cloud manufacturing
paradigm, an advanced form of networked manufacturing. This process is based on a combination of existing
manufacturing systems and emerging technologies, such as cloud computing, virtual manufacturing, agile
manufacturing, manufacturing grid, IoT, and service-oriented technologies (Akbaripour et al., 2015). Global supply
chains (and related value chains) are becoming increasingly connected due to the increased globalization in terms of
network size, strength and connectivity, showing significant intertemporal changes, and higher clustering (Tsekeris,
2017).

8. Multilayer Networks

The world is messier than conventional economic models traditionally assume. Many real-world complex systems
are accordingly best modeled by multiplex (multidimensional) networks of interacting layers (Lee et al., 2015). These
interconnected systems are very sophisticated and may give a better explanation of the workings in the field of social
network analysis, economics, operations management, finance, etc., so being consistent with corporate governance
concerns.
Complex multidimensional networks host multiple kinds of relations (multiplex, multilayer, multilevel, multi-
relational, interconnected, interdependent, etc.), and may yield valuable insight in many interdisciplinary fields. These
networks of networks may concern social networks that involve different types of connections, networks of airports
connected by different air carriers, multiple infrastructures of a country that are mutually connected, etc.
Nodes simultaneously belonging to different layers (networks) can be represented mathematically by adjacency
tensors with inter-layer edges that connect each network to the other. These links enhance the overall value of the
network of networks, boosting Metcalfe’s formulation.
Whereas the sophisticated mathematics that explains these relations (see Bianconi, 2018) goes far beyond this
preliminary study, some economic implications may be worth considering.
The inter-layer edges (links) between the different nodes go beyond every single layer and connect two (or more)
adjacent layers, representing a network of networks with multiple subsystems and connectivity properties. If the links
between the nodes increase (both in the same layer and thanks to an inter-layer connection), there is a corresponding
value growth of the systemic network of networks that might be estimated with Metcalfe’s law.
Figure 7 – Multilayer Networks

patients Product 1
Country A

Product 2
private
Country B SPV

Figure 7 shows at first sight that inter-network bridging edges (that link nodes in country A with country B, product
1 and product 2) add value to the whole network ecosystem. This incremental value may be tentatively estimated (with
a differential without/with approach) comparing unrelated networks with linked ones.
An economic interpretation of multiplex networks is – to the author’s best knowledge - still underexplored and may
be generalized (including further interacting layers in a dynamic ecosystem), giving an innovative explanation of the
interactions between e-supply and e-value chains. Digital platforms may once again represent the virtual linking edge
among the networks.

8. Discussion

The interdisciplinary analysis of the implications of networked digital platforms on corporate governance raises
essential questions worth a more-in-depth analysis. Online interaction of stakeholders (with social networking and big
data sharing) reshapes corporate governance patterns. Using big data, firms gather information and data on the needs
and wants of stakeholders without requiring direct interaction with them (Pedrini and Ferri, 2019).
Corporate governance structures and firms connected through digital platforms become decentralized,
unmediated (Fenwick et al., 2017), and interconnected. Networks follow iterative patterns and are frequently horizontal,
open, and autonomous: the way stakeholders interact is profoundly reshaped, with disruptive consequences on
governance:
• vertical hierarchies (typical of family businesses or multinational firms) are replaced by sharing mechanisms;
• stewardship changes accordingly and is replaced by horizontal interaction among stakeholders;
• personalized consumer experience becomes increasingly important;
• relationships flatten and become more inclusive;
• peer-to-peer (P2P) transactions replace traditional supply chain patterns;
• Stakeholders interact via contract nexuses to co-create shared value.

External contract nexuses typically involve synergic stakeholders connected to the firm by pass-through contracts
or other cooperation agreements.
Both the networked firm and the digital platform(s) can be considered a bridging node, as shown in Figure 5.
According to the Granovetter (1973) theorem, strong ties are unlikely to be the sources of new information since they
already share data. Bridges are more commonly weak ties (as they tend to have little if any link with indirect nodes) and
are consequently the best potential sources of novel information. Governance implications are still largely unexplored
and may confute some of the Granovetter theses, considering the pervasive impact of digitalization that may strengthen
weak ties. Even this issue deserves further theoretical and practical analysis.
New research avenues may include:

• The architecture of the digital ecosystem (see Wareham et al., 2014) to balance the different interests (with a trade-
off between centralized versus distributed control), bypassing vertical hierarchies, favoring horizontal interaction of
stakeholders and their incentives to co-create and share value;
• The relationships between platform providers and app developers (see Eaton et al., 2015);
• Vulnerability (contagion) of the network (to cyber-attacks, etc.) due to interconnectivity;
 Corporate Governance, Digital Platforms and Network Theory

• The features of networked / digital supply and value chains (exemplified in Figure 6) and their incremental
(differential) value, compared to traditional supply / value chains;
• Competition between platforms (dominant versus newcomers, etc.) in multi-sided markets (Rochet and Tirole, 2003),
especially in the presence of tech giants (in e-commerce; social networking, etc.) and other keystone firms able to
extract monopolistic rents;
• The issue of how to govern digital platforms and their ecosystem, balancing the different interests of the networked
stakeholders (Darking et al., 2008);
• Innovative ways (following digital/networking patterns) to interpret the current relation between environmental,
social, and governance (ESG) criteria and corporate financial performance (Friede et al., 2015; Bellavite Pellegrini
et al., 2019).

9. Conclusion

Digitalization is the process of transforming information or physical products into digital form, allowing businesses
to “go paperless”. Thanks to digital solutions new forms of innovation and creativity are conceived while traditional
business models are revised. Old-fashioned firms interact with digital startups, with a cross-pollination process that
drives the analogic-to-digital transition. Digital links enable real-time exchange of information or e-transactions (B2B /
B2C), reducing information asymmetries and other frictions. Real-time interaction between stakeholders helps to
minimize risk and enhance returns by win-win value co-creation paradigms.
Digital platforms are emerging as a virtual stakeholder that bridges nodes among players inside and outside the firm.
Platform, as well as firm interactions, may conveniently be interpreted with network theory, showing which are the links
among the stakeholders and how they concretely work.
The interactions among composite stakeholders raise conflicts of interest that threaten the dynamic equilibrium of
ecosystems. Interfacing digital platforms deeply reshape these relations via a better sharing of big data. The challenge
is to design sounder ecosystems that converge interests and make the digital supply and value chain more resilient.
Improved flexibility to endogenous conflicts and exogenous shocks reduces risk, minimizing governance criticalities.
This interdisciplinary interpretation has profound implications on corporate governance and might launch a new
literature strand that addresses the still under-explored digital interactions.
13
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