How APIs Create Growth by Inverting the Firm

• 成果类型: Article
• 署名作者: Benzell, Seth G.; Hersh, Jonathan; Van Alstyne, Marshall
• 署名单位: Chapman University System; Chapman University; Massachusetts Institute of Technology (MIT); Boston University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4968
• 发表日期: 2024
• 页码: 7120-7141
• 关键词: platforms; Digital platform; api; application programming interface; inverted firm; open innovation; network effects; digital strategy; Data breach; business ecosystem; Market capitalization

摘要

Traditional asset management strategy has emphasized building barriers to entry or closely guarding unique assets to maintain a firm's comparative advantage. A new inverted firm paradigm, however, has emerged. Under this strategy, firms share data seeking to become platforms by opening digital services to third parties and capturing part of their external surplus. This contrasts with a pipeline strategy where the firm itself creates value. This paper quantitatively estimates the effect of adopting an inverted firm strategy through the lens of application programming interfaces (APIs), a key enabling technology. Using both public data and those of a private API development firm, we document rapid growth of the API network and connecting apps since 2005. We then perform difference-in-difference and synthetic control analyses and find that public firms adopting public APIs grew an additional 38.7% over 16 years relative to similar nonadopters. We find no significant effect from the use of APIs purely for internal productivity: the pipeline strategy. Within the subset of firms that adopt public APIs, those that attract more third party complementors and those that become more central to the network see faster growth. Using variation in network centrality caused by API degradation, an instrumental variables analysis confirms a causal role for APIs in firm market value. Finally, we document an important downside of public APIs: increased risk of data breach. Overall, these facts lead us to conclude that APIs have a large and positive impact on economic growth and do so primarily by enabling an inverted firm strategy.