Industrial Organization in the DigitalEconomy Era: Evolution and Effects

Guo Chaoxian, Hui Wei*

Institute of Industrial Economics (IIE), Chinese Academy of Social Sciences (CASS), Beijing, China

Abstract: Advances in digital technology and vast data applications have resulted in theemergence of the digital economy paradigm, which is a new techno-economic paradigmfor the digital economy age. Under this paradigm, the industrial organization has shiftedtoward networked, platform-based, boundaryless, and integrated development withnew characteristics. Specifically, there has been a fierce “positional arms race” fueledby financial capital, accelerating the growth of platform companies. The “hierarchicalmonopolistic competition” market structure has taken shape, resulting in a “coexistencewithout disruption” monopolistic competition. As platform businesses expand into newbusiness sectors, competition among industrial ecosystems intensifies. Data and algorithmshave become secret weapons for corporate success, allowing platform companies to expandtheir monopolistic forces. Industrial organization in the digital era has revolutionized theoperating rules and logic of industrial economy, giving rise to new industries, businessmodels, and paradigms, as well as being conducive to international cooperation andintelligent regulation. Meanwhile, it has introduced new challenges to socioeconomicdevelopment, making platform companies’ anti-competitive and monopolistic behaviorsmore implicit, privacy and security concerns more conspicuous, and antitrust identificationand investigation more difficult. The government should embrace the evolving trends ofindustrial organization in the digital economy era, accelerate regulatory transition, andstrengthen governance and regulation under the digital economy paradigm.

Keywords: Digital economy, evolution of industrial organization, platform companies,

JEL Classification Codes: L00

DOI: 10.19602/j.chinaeconomist.2024.07.02