Progress of Digital Platforms and Their Impact on Japan's Industrial Competitiveness

         
Author Name MOTOHASHI Kazuyuki (Faculty Fellow, RIETI)
Creation Date/NO. November 2020 20-P-029
Research Project Digitalization and Innovation Ecosystem: A Holistic approach
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Abstract

Digitalization has a transformative impact on innovation in firms and markets, and new business models based on digital platforms are disrupting traditional industries. However, understanding the impact of digital platforms on the supply side of manufacturing industries, where Japan's industrial competitiveness is based, is insufficient. This paper conducts and discusses a review of existing studies on digital platforms and the relationship between digitalization and Japan's industrial competitiveness. A platform business can be categorized into three groups, type 1 (internet platformer type), type 2 (producer ecosystem type) and type 3 (IoT data-use type), depending on the existence of direct and/or indirect network effects on the producer and consumer sides of the platform. We have compared these three types of platforms together with "pipeline businesses" (with a traditional supply chain model) regarding the impact of digitalization on each business model. Our analysis found that digitalization does not directly affect the existing pipeline model, as is shown in the automotive industry, for example. However, the convergence of virtual and physical environments (CPS: Cyber-Physical System) redefines the boundaries of existing markets, which introduces a chance of existing pipeline models being displaced by new integrated services, based on platform models.