Mechanism Design Issues in Technological Systems
Technological systems contain complex elements and processes with a diverse set of agents and problem-solving arrangements. They often interact with and influence multi-lateral stakeholders with varying interests and incentives. Recent technological developments and engineering advancements such as digital marketplaces and high-tech networks create both new challenges and opportunities to understand further about effective mechanism designs. This dissertation attempts to answer corporate-level mechanism design issues in two different technological systems: high-tech biopharmaceutical networks and the online peer-to-peer lending industry.
The first part of the dissertation focuses on identifying the emergence and evolution of near decomposable systems in interorganizational relationships. To do so, first I conceptually discuss how near decomposable systems can emerge in interfirm relationships. Second, leveraging advancements in network science, I empirically analyze a detailed biopharmaceutical alliance data set and find that strategic alliance networks of biopharmaceutical firms exhibit near decomposable characteristics. I identify an emerging evolutionary pattern with smaller networks of subcommunities organizing hierarchically over time into a larger network structure, with the subcommunities generally exhibiting local clustering. A salient finding, compared to previous studies in the field of strategic management, is the identification of nested clusters formed in hierarchical fashion within this interfirm network. I find the potential for simultaneous evolutionary processes to be in play in various subnetworks within the overall industry-level network. The accrual of local changes impacting the structural processes of the subnetworks slowly diffuses to the larger, less integrated modules of the network. Finally, with the help of a simulation model, I identify how fitness heterogeneity among firms, fitness heterogeneity among partnerships and the rate of growth of partnerships impact the emergence of near decomposability in varying degrees.
The second study focuses on understanding an important market access control mechanism: platform owners granting priority access to a subset of supply-side complementors to grow the marketplace and remove potential demand-side bottlenecks. Platform governance mechanisms, such as market access control, help to align all market players towards a specific value proposition. I study the interplay between priority access and the variation in expertise of the complementors. Leveraging a randomized priority access given to expert institutional investors in the online peer-to-peer lending industry, I show that it creates negative spillover effects on the performance of crowd retail investors. I provide evidence in support of two mechanisms in driving the impact of priority access, the intensity of priority access and cream skimming by institutional complementors, on the retail crowd market. Again using simulation to extend the analysis, I find that the brunt of negative impacts is likely borne by more risk-averse retail investors.