1 Introduction

In November 2013, home sharing platform Airbnb organized a rally for its hosts in the face of regulatory restrictions in the city of New York. As reported by Bradshaw (2013), Airbnb’s founder Brian Chesky told his audience: “This is the new economy, a sharing economy, (…) It’s starting to feel like a revolution (…) We can take the power back.” Regarding the city’s imminent regulatory restrictions, he argued: “Fundamentally here is the problem: there are laws for people and there are laws for business but you are a new category, a third category — people as businesses. As hosts, you are micro-entrepreneurs and there are no laws written for micro-entrepreneurs.”

Airbnb’s frame evokes an image that individuals can do without large corporations by entering into direct “peer-to-peer” interactions reminiscent of the early days of the Internet when many believed it to be a force for empowerment (Schor, 2016). Politically, the quote puts forward the claim that online platforms operate in a “legal void”, as if existing laws and regulations would be inconsistent with innovation (Elert & Henrekson, 2016). Uber followed a similar discursive strategy arguing that laws and regulations are outdated and do not keep up with the pace of innovation embraced by users (Pelzer et al., 2019).

The framing of online sharing platforms as digital marketplaces that support individual people to make money as a “micro-entrepreneur”, is a pervasive one. It applies to a variety of contexts ranging from hosts on Airbnb, drivers on Uber, vloggers on Youtube, writers on Amazon and taskers on TaskRabbit (Kenney & Zysman, 2016; Schor, 2016). Following the reasoning that platforms drastically reduce transaction costs, some contemplate an economy that can “survive without corporations” (Davis, 2016), and others predict “the end of employment” (Sundararajan, 2017).

Consistent with this framing, online platforms legally define “micro-entrepreneurs” as hobbyists, partners or else as independent contractors. Platform companies view individuals offering products or services as independent businesses on a digital marketplace, just using the platform to reach out to their clients, who pay either directly or indirectly through targeted advertisement.

Following the common understanding of online platforms as digital marketplaces, it is meaningful to compare platforms with traditional market intermediaries. Social media platforms, for example, are similar to traditional media (TV, newspapers) in that content attracts viewers whose “eyeballs” serve as sales channel for advertisements. And, taxi-hailing apps such as Uber and Lyft perform the same function as traditional telephone operators in connecting a passenger to a driver in real time. These historical analogies help to discern the innovative — and transformative — nature of online platforms. In providing intermediary services to a large group of participants that they can govern digitally, they act as infrastructures (Grabher & König, 2020). Different from traditional market intermediaries platforms have the capacity to systematically track the location, behavior, production, choices, transactions and reviews of millions of people. In addition, classifying and storing information as big data (“datafication”) allows them to resell or use that information in targeted ads (“commodification”) and to feed algorithms, which prioritize certain topics, persons or offers over others (“selection”) (Van Dijck & al., 2018). Platforms thus claim ownership of data generated by the actions of participants, while participants — having accepted the terms and conditions — have no insight into how their data is used later on nor get a share of the surplus generated by those activities.

In the spirit of Polanyi (1977), then, one may argue that the notion of online platforms as digital marketplaces reducing transaction costs suffers from an economistic fallacy. First, platforms do not simply intermediate transactions. They also exercise asymmetric power over the participants they connect, acting as “private regulators” (Boudreau & Hagiu, 2009). They can govern the actions of market participants through their infrastructural power to disconnect them from the platform at will as well as through their algorithmic power to rank them high or low depending on past behaviours (Van Dijck et al., 2018). Second, while transaction costs are drastically reduced by platforms, the true costs of participation can be high. The conversion of employment into independent contracting implies that individual workers receive no monetary compensation for things like search efforts, review writing and waiting time (Drahokoupil & Piasna, 2017). Taken this reasoning one step further, one could argue that the sheer presence of participants on a platform leaves data traces that are commodified without monetary compensation. Hence, the notion of digital marketplaces would logically not apply given that the data itself are not transacted (Zuboff, 2019).

Following these critiques on the dominant understanding of online platforms as digital marketplaces, we aim to develop a mirror-image conceptualization of online platforms as corporations. We want to showcase how the development of the platform economy can be interpreted as the triumph of the corporation, evidenced in particular by the platform’s increasing take-over of critical intermediary functions on the market and in society as a whole (which were previously performed by non-corporate actors). We specifically reflect on online platforms that extract value from and govern the work carried out by participants performing (paid and unpaid) labor, referring to gig work, asset sharing and social media. We propose to understand online platforms first and foremost as corporations and platform participants as workforce. Online platforms perform very similar functions as any other corporation, but in largely different ways (applying terms and conditions as a legal framework and data, reviews, and algorithms for decentralized control) and largely different contexts (informal labor markets, sharing practices, social media) than traditional corporations did hitherto. In essence, platforms manage their workforce with a capacity similar to traditional corporations and in the interest of its investors, but without the formal obligations that traditional corporations face regarding their employees and other stakeholders. The corporation perspective thus helps us to understand the transformative power of platforms, but as a historical continuation of the corporation as a basic institution in society. Rather than arguing that online platforms operate as “evasive entrepreneurs” in a “legal void” working around outdated laws and regulations (Elert & Henrekson, 2016), we will emphasize that their transformative capacity lies in their continuous development of new institutions that they impose on their workforce and their clientele, codified in terms and conditions. It is this re-coding capacity that provides platforms the ability to continuously adapt the course of institutionalization in largely autonomous manners.

Our essay being preliminary, the aim is to invite scholars studying corporations in different disciplines to join our efforts to understand the analytical specificities and historical roots of platform capitalism (Langley & Leyshon, 2017; Rahman & Thelen, 2019). We see the corporation perspective as just one window on a multifaceted phenomenon, and as complementary to other theoretical perspectives that equally emphasize the new modes of governance introduced by online platforms, including the frameworks of organization-of-markets (Ahrne et al., 2015; Kirchner & Schüßler, 2018), evaluative-infrastructure approach (Kornberger et al., 2017) and the Möbius organizational form (Watkins & Stark, 2018).

2 Platform as Corporation

The corporation can be considered one of the most central institutions of the capitalist West. Organizational sociologists have long observed the global expansion of formal organization in many areas of society, documenting a dramatic increase of organizations of all sorts, especially after World War II (Drori et al., 2006). This expansion also concerns the for-profit sector, where the corporate firm has become the most common organizational form, ranging from small and medium-sized enterprises to transnational corporations (Chandler & Mazlich, 2005). Although there is empirical evidence of corporations existing as a way of organizing economic activities for centuries, the corporation, as we know it today, became dominant in the wake of the industrial revolution with mass production and distribution. While many variations of corporations exist today, it is possible to deduce a certain underlying institutional logic of the ideal-type corporation (Thornton et al., 2012). There are codified exemplars of the modern corporation, probably best represented by Chandler’s (1962) seminal classification of firms into unitary form (U-form) or multidivisional form (M-form), each with its own implication for managerial strategy and transaction costs. The ideal-typical goal of the modern, Chandlerian corporation is to grow in size by geographic or product diversification. While scholars have found a variety of corporate governance forms that go beyond the simplicity of this classification (Fligstein & Freeland 1995), it is still possible to deduce a particular institutional logic of the corporation that specifies the unique sources of identity, authority and legitimacy as well as particular mechanisms for formal and informal control that differ from the ones applied in other social contexts, such as in the family, the community or the church (Thornton et al., 2012). Corporations are characterized by limited liability and their basis for membership is the employment contract. Members are organized within a bureaucratic hierarchy led by a board of directors with formal authority. The bureaucratic hierarchy also maps out the typical career paths for individuals to climb the corporate ladder.

Corporations have also been described as a corner stone of managerial capitalism and are heavily intertwined with market institutions (Friedland & Alford, 1991; Fligstein, 2002). As such, corporations have become an integral part of the twentieth century welfare state, consisting of layers of institutions and actors created to facilitate their operations, such as anti-trust laws, wage negotiation by unions and industry associations, and labor laws promoting decent work. At the same time, having an employment contract is often essential for individuals to obtain insurances, pension, social security numbers and other welfare benefits. The fundamental role of corporations in today’s society is thus important to note in order to understand the transformative effects that platforms might have.

Viewing online platforms as corporations, then, may seem an obvious perspective in at least two respects. First, most online platforms are corporations in a legal sense, profit-oriented and initially backed by venture capital with the aim to have its shares traded later on via an IPO. While the simple fact that most platforms are corporations is well-known and seldom ignored, only few take a corporation perspective as starting point for theorizing (e.g., Zuboff, 2019).

A second reason for approaching the platform from a corporation perspective is that they manage a “workforce” just as traditional corporations do. In this context, it is telling that Human Resource Management (HRM) scholars are among the most active theorists on platforms by now (for a review, see Duggan et al., 2020). Despite the absence of an identifiable employment relationship, platforms apply various HRM techniques to their workforce (Meijerink & Keegan, 2019), such as algorithmic content moderation or removal (e.g., following low ratings or written complaints), reward schemes for high-performing individuals (e.g., by higher search rankings or higher payment per view), and deactivation or “dismissal” in traditional HRM terms. While this HRM perspective on platforms focuses on the so-called “gig economy” where a requester hires an independent contractor via an online platform, the HRM principles stretch beyond paid gigs. Social media platforms, for example, equally police participation, moderate content and reward high performers (Van Dijck et al., 2018).

From a Marxist point of view, approaching the platform as essentially a corporation makes perfect sense. Platforms retain the right to fully appropriate the information content and digital traces generated by their workforce as “free labor”, thus extracting the surplus from labor as any other corporation does (Terranova, 2000; Zuboff, 2019). In this process, platform users train algorithms with data that are subsequently used to provide personalized recommendation services that could deskill professional workers. It is no coincident that platforms’ algorithms initially mainly substituted low-skill work in private sectors such as travel agencies, telephone operators, and retail shops. By now, however, they also target high-skilled jobs, mainly located in public sectors, by providing algorithmic “expert advice” to support professionals in media, education, and healthcare (Van Dijck et al., 2018).

Yet, there are differences in the balance of power between the platform corporation and its platform workers, and between a traditional corporation and its employees. On the one hand, a platform can exercise more economic power over their independent workers than traditional companies over their unionized employees because price fixing among independent contractors is prevented by anti-trust law. While other forms of unionization may be allowed, platform workers are not easily united given that they do not share a workplace and are highly heterogeneous in backgrounds and earnings (Schor et al., 2020). On the other hand, platforms exercise less power over its workers, as the latter can easily switch to competing platforms or even work for multiple platforms at the same time (“multi-homing”) (even though platform workers cannot transfer their reviews from one platform to the other in most cases). What is more, workers can also try to enter into repeat transactions with requesters outside the platform, thus avoiding having to pay a commission, a practice that some platforms actively try to punish (Schor et al., 2020).

In view of the differences between platform corporations and traditional corporations, some argue that platforms should be understood as hybrid organizations combining the institutional logics of the corporation and the market (Altman et al., 2019). As Greenwood et al. (2011) argued: “To the extent that the prescriptions and proscriptions of different logics are incompatible, or at least appear to be so, they inevitably generate challenges and tensions for organizations exposed to them” (p. 318). A platform qualifies as a hybrid organization in that they apply “a corporation logic” to manage its workforce as just explained, but they do so by transacting with them — and having them transact with clientele — following a “market logic” (Frenken et al., 2020). And, in some cases, the workforce itself follows community principles, adding a third “community logic” (Watkins & Stark, 2018; Grinevich et al., 2019; Vaskelainen & Münzel, 2018). Yet, to study a platform as a hybrid organization sheds little light on the platform as a contested phenomenon, because platforms have found a way to render the corporate and market logic complementary rather than conflicting. It combines the managerial capacity of the cooperation with the flexibility of the market, thus circumventing the whole regulatory apparatus, and the associated costs, that protects workers with an employee-status. It is only at the level of workers that logics become conflicting, as workers are classified as independent contractors (viz. a one-person “corporation”) but do not enjoy the market freedoms that generally go with it (Frenken et al., 2020).

Rather than viewing online platforms as hybrid organizations, we consider platforms a new corporate form, one with a specific capacity to control a workforce without employing them. In this context, the useful notion of platforms as “evaluative infrastructures” has been put forward (Kornberger et al., 2017). Platforms make use of the ratings and reviews of clientele in the algorithimic assignment of tasks to their workforce, be it directly or through rankings in search listings. The ratings and reviews are supplemented with platform’s own surveillance data collected by tracking and tracing platform participants (e.g., using GPS, time to response, time to completion, etc.) that can be fed into the algorithm, and, in some cases, as human “community manager” who is nevertheless not employed by the platform (Reischauer & Mair, 2018; Watkins & Stark, 2018).

Following Kornberger et al. (2017), platform corporations implement quality control in rather different ways from traditional corporations. As a private regulator, a platform assumes quality control functions traditionally delegated to government agencies or professional organizations. In principle, platforms allow anyone to enter, but exercise surveillance on “workforce” ex durante (through algorithmic moderation) and ex post (as negative reviews may lead to discontinuation). In these ways, platforms can maintain a certain quality level, without making use of codified quality criteria otherwise. This type of governance is in stark contrast to traditional markets where quality is typically maintained by professional criteria that are enforced by professional organizations as well as consumer and labour protection regulations enforced by the state. Regulations, licences, diplomas and labels all attempt to maintain quality and protect consumers and workers, for example, regarding health and safety and contract enforcement.

The specific organizational innovation, then, concerns a technology for decentralized control while retaining centralized power in the hands of the platform corporation (Kornberger et al., 2017). It is this combination of decentralized control and centralized power that makes the platform a new corporate form, allowing it to handle a much more heterogeneous workforce than traditional corporations (Schor et al., 2020). The platform’s “retreat” from control grants workers the freedom to engage in multi-homing and, by and large, to create their own social media content, rent out whatever goods they own, or carry out whatever service they want to offer. This then explains why the backgrounds, motivations and earnings of the workforce of a single platform vary so much, despite the fact that they are all subject to the same evaluative infrastructure (Schor et al., 2020). Heterogeneity in the workforce is a direct result of ceding management to technology. The platforms also “retreats” from controlling hours, scheduling, and the labor process because the algorithm plus reviews can handle the allocation and surveillance of tasks. However, in contrast to true “free” markets, firms do have power over workers in ways that the market logic — and the economic theory of markets — does not account for (McKee, 2017; Schor et al., 2020).

Online platforms thus “disembed” themselves from traditional institutions codified in laws and regulations and maintained in professional codes and practices. They do so in explicit manners following Silicon Valley’s adagium “Don’t ask permission, ask forgiveness” (Kenney & Zysman, 2016, p. 67). Uber, for example, has explicitly framed its support to illegal drivers as legitimate referring to government regulation and the taxi profession as outdated and against innovation (Pelzer et al., 2019). And Airbnb claimed that there are no clear laws written for homesharing and that it should thus not be forbidden under current law (Stabrowski, 2017). However, the mere fact that platforms do not comply to regulations and governments have difficulties enforcing them does not imply that platforms operate in a “legal void” (Elert & Henrekson, 2016), also called a “formal institutional void” (Bothello et al., 2019). On the contrary, a platform’s main selling point is to provide an institutional infrastructure so that multiple parties can interact online in predictable manners. To say that platforms are operating in a void is meaningful only from a historical perspective as they challenge the existing institutions by largely by-passing them. As platforms unilaterally impose rules on their participants — who have to accept the terms and conditions before entering the platform — they act as “private regulators” (Boudreau & Hagiu, 2009) in moderating interactions online. Put differently: “platform operators, then, co-produce their own institutional and societal embeddedness” (Grabher & Van Tuijl, 2020, p. 1012).

The terms and conditions imposed by gig economy platforms are generally quite explicit in defining the platform’s workforce as independent contractors and the platform as an intermediation service that assumes no responsibility for the performance of its users (Prassl & Risak, 2015). At the same time, the platform retains the right to exclude listings or users at will. In similar ways, social media do not accept any formal responsibility for the content that users post, but nevertheless curate by removing particular content (Helberger et al., 2018). What is more, as platforms have a great interest in quality control and good reputation of their participants, they tend to make participation in dispute resolution by the platform also part of their terms and conditions. There are strong incentives for participants to engage in platform’s resolution of disputes, as they risk to be excluded from the platform if they refuse to do so (Gamito, 2017). This mode of governance by platforms can thus be considered as a form of “private governance” given that, as a private actor, the platform takes on the role of regulator, implementer and dispute resolution body at the same time (Ulfbeck et al., 2018). It is this new mode of governance, encoded in terms and conditions, which sets platform corporations apart from traditional corporations that employ their workers (Daugareilh et al., 2019).

Terms and conditions, however, are not set in stone. On the contrary, the versatility of platforms lies in its ability to swiftly change the exact terms and conditions. In this way, platforms do not only adapt their business models to commercial opportunities but also to changing regulatory contexts (Van Dijck et al., 2018). Just as their technological capacities evolve through changes in the software codes, so do platforms evolve — or better “recode” — their formal institutional embedding through ongoing adjustments in their terms and conditions. This versatility is made possible by the absence of labor contracts with their workforce and their “asset-light” nature where capital assets are owned and maintained by members of the workforce themselves (houses, cars, telephones, etc.). This also explains why attempts by traditional businesses or unions to bring platforms to court with reference to alleged breaches of competition, consumer or labor laws or local regulations have had only limited effects (Koutsimpogiorgos et al., 2020). If rulings provide any clarity at all, platforms can quickly re-code their software and/or alter their terms and conditions, creating a new artifact with slightly different workings that would necessitate a new court case, and so forth. The re-coding capacity provides platforms the ability to continuously adapt the course of institutionalization in largely autonomous manners.

3 Situating Platform Capitalism

Having discussed online platforms from a corporation perspective in an analytical sense, we now turn to one particular spatial-historical context in which online platforms have become very active: continental Europe. It is in this particular context that online platforms have lost some of the legitimacy that they had initially built up as innovative starts-ups. The main concern that has emerged concerns the mismatch between the classification of platform workers as independent contractors on the one hand and the social security organized around labor employed by traditional corporations on the other hand (Koutsimpogiorgos et al., 2020). The increasing number of people earning an income via platforms instead of a formal employment contract is challenging the foundations of the twentieth century welfare state regime. Fewer people share risks in collective social security arrangements, which causes low-paid, high-risk platform work to become more precarious and high-paid, low-risk platform work to be more lucrative because they save on collective insurance contributions (Schor et al., 2020).

From a labor law perspective, the control that platforms exercise over independent contractors would possibly qualify the platform as employer and platform workers as employees (De Stefano, 2016; Prassl, 2018). Following this legal reasoning, there are various attempts by unions and labor parties across Europe to change the current status of platform workers as independent contractors into a status of employees of the platform. If these attempts would succeed, gig work would be re-institutionalized into the established corporate logic including employee status, social protection and union representation. Yet, in such a future development, the platform as a new organizational form would not cease to exist. The employee status — if granted at all to platform workers — is likely to apply only to platforms that exercise substantial control over workers by algorithmic matching and pricing (e.g., in taxi and delivery sectors) (Koutsimpogiorgos et al., 2020). In sectors where the workforce enjoys more freedom to select assignments and set prices (e.g., odd jobs, cleaning, asset sharing) or does not receive monetary compensation (e.g., social media), it remains unlikely that the employee status will be instated. What is more, even for platform workers with an employee status, it holds that they can still be managed by algorithms exercising decentralized control, with flexible working hours maintained by zero-hour contracts or via temp agencies. Thus, a theoretical approach to platforms as corporations remains valid in case (some) platform workers will acquire an employee status in the future.

In an institutional perspective, the emergence of online platforms is best understood as a gradual rather than a disruptive type of development (Hinings et al., 2018). Situating this development in Europe, one could argue that recent reforms in welfare state arrangements preceding the advent of online platforms, may actually have been supportive to the rise of platforms. Notably, the emphasis on tenure employment was loosened with the institutionalization of more flexible work contracts, zero-hour contracts and temp agencies (Stanford, 2017; Hyman, 2018). In this sense, the platform model cannot be considered to be functionally discontinuous with preceding corporate forms and the labor laws supporting them.

Unlike the popular notion that many traditional businesses are disrupted by online platforms, it should be noted that platforms have mostly come to dominate in historically “anomalous” contexts where traditional corporations — and their welfare arrangements — were largely absent or progressively contracted in recent decades. Second-hand markets, taxi rides, food delivery and home cleaning all serve as examples where informal practices co-existed next to formalized ones (Koutsimpogiorgos et al., 2020). And, in historically more formalized markets such as programming, translating and editing, corporations were anyway of limited importance, given that most of such work was already done by independent contractors before the advent of platforms. Social media platforms, in this sense, may be considered most disruptive as it disrupted the ad-based business model of traditional media companies with severe consequences for the profession of journalism (Van Dijck et al., 2018).

The sharing economy is another historical context, in which online platforms successfully penetrated (Frenken & Schor, 2017; Van Dijck et al., 2018)). Before the advent of platforms, sharing consumer goods was a standing social practice — especially among those with low income — where people carpool to work and lend out their possessions to family, friends and neighbours. Similar to gig platforms, today’s sharing platforms have extended and expanded this informal practice beyond this trusted circle, also called “stranger sharing” (Schor, 2016). Analogously, people historically shared pictures and stories among family and friends, but now post content on social media platforms reaching out to a larger audience (Van Dijck et al., 2018; Watkins & Stark, 2018). Now that platforms economize private possessions and cultural content, it may lead to the crowding out of (offline) altruistic sharing in a community logic in favor of online participation on platforms, although this claim has remained under-researched (Frenken & Schor, 2017).

4 Concluding Remarks

We can conclude that platforms have mostly entered in contexts where the corporation — and the social security and government regulations tied to it — was largely absent. This also explains why the advent of platforms in such contexts, in particular their self-regulatory capacity, may present attractive benefits to governments. Given the government’s own inability to guarantee the security of workers and consumers in “informal” industries, platforms can present themselves as legitimate in “formalizing” these industries, claiming to protect the interests of their workers and their clientele by reviews and rating and — in some cases — even insurances. If the trend towards formalization progresses, government can more effectively tax activities that hitherto remain largely under the radar of tax offices.

There are certainly also industry contexts where platform corporations compete head to head with traditional corporations. Notable examples are the music, media, TV, tourism, retail and transportation industries. It would, however, be too early to claim that traditional corporations are severely undermined. Either way, as we have tried to argue, the corporation would triumph. That is, the key transformation unfolding with the advent of platform capitalism does not lie in the disruption of traditional corporations by online platforms, but in the ways the corporation — as an institution — is embedded in society. Where traditional corporations found a way to pacify their conflicts with employees in a national welfare state system through institutionalized negotiation with unions that are sanctioned by government, platforms hitherto govern their workforce outside such established arrangements by relying on their own governance capacities.

Following our analysis of the platform economy, one specific question that remains is whether the levels of social security that employees in some parts of the world have grown accustomed to, will be further hollowed out by more flexible labor contracts and independent contracting, or whether the social security arrangements will be re-invented in ways that detach them from their almost automatic coupling with an employment contract. For example, social security rights and obligations can be made universal and compulsory for anyone earning income (including a potential universal income given out by the state), regardless of their status as an employee, independent contractor, student or retiree. This could create a level-playing field for platform work and work done by employees, as a point of convergence of the traditional welfare state regime and the newly emerging platform regime. Alternatively, a parallel social security system can be developed for low-paid platform workers by having them organize in insurance cooperatives. The latter arrangement would further set the two regimes apart, but nevertheless be legitimate as the underlying values of social protection are transferred from the welfare state to the platform regime.