In the Realm of Hungry Ghosts: Multi-Level Theory for Supplier Participation on Digital Platforms

Digital platforms have transformed various industries, with profound changes witnessed in settings characterized by repeated, low value, and novel transactions, such as ride sharing, household services, and food delivery. Platform providers need to understand the factor(s) that suppliers consider before choosing to participate on their platforms. We argue that multi-level theorizing is necessary to explain the patterns of decision criteria that constitute the complex, yet boundedly-rational decision of platform participation. We draw on multiple theoretical perspectives which include predictors from firm-level strategic behavior, firm-level digital predictors, institutional predictors, and platform level, competition and contextual (environmental) predictors to model restaurant’s decision to participate on food delivery platforms, which are an exemplar of platforms that digitize transactions of ubiquitous and episodic nature. The population of 95,735 restaurants, serving a total of 135 different cuisines, located in the 37 largest cities of India, forms the dataset for developing our multi-level theory. Our decision tree induction methodology, which employs high levels of pruning, empowers us to discover context-specific rules that serve as credible approximations of the partial ordering of decision flows tacitly used by restaurants in deciding to participate on platforms. We identify six combinations of predictors, that is, decision rules, which are situated in at least four theoretical perspectives, to succinctly explain supplier participation on digital platforms. Finally, we abduct away from these specific decision rules to develop generalizable theoretical propositions. The decision trees, context-specific rules, general forms of the rules, and generalized propositions together form our multi-level theory for supplier participation on digital platforms. Our findings aid platform providers identify suppliers who can be the focus of efforts to increase platform participation, and help suppliers identify the participation status of competitors. For policymakers, our findings imply that incentives at the ends of the pricing spectrum can increase supplier participation on digital platforms.