The Power Hidden in the Channel
This chapter examines the power relationship between a small firm and the digital platform it relies on for customers, transactions, visibility, and operating infrastructure. The specific question is what turns a useful route to market into a critical resource that the firm cannot replace without serious loss. The answer gives readers a practical way to diagnose bargaining power: identify what the platform supplies, how many credible alternatives exist, who sets the conditions at the interface, and how dependence changes the smaller firm’s ability to negotiate or leave.
Dependence begins with a critical resource
The word “dependence” can sound like a judgment about a firm’s weakness. In resource-dependence theory, it is first a description of an operating fact: organizations need resources that they do not own and must obtain from their environment. A business may need suppliers, finance, specialized knowledge, distribution, labor, or access to customers. Relationships with other organizations help it obtain those resources, but they also expose it to the priorities and decisions of whoever controls them.
Digital platforms make this relationship easy to overlook because the resource arrives through an interface that feels simple. A small firm can upload an offer, accept an agreement, and begin reaching customers without building every part of a market system itself. The convenience is real. The platform may provide discovery, transactions, visibility, and logistics as connected services. But simplicity at the user interface does not mean simplicity in the underlying power relationship. The firm is still relying on an external organization to keep a critical part of its business functioning.
A resource is critical when losing it would interrupt the firm’s core activity, not merely make one task less convenient. If a seller can replace a routine supplier at roughly comparable cost and speed, that supplier may be important without being decisive. If the seller cannot reach a target market without the platform’s audience, local infrastructure, or visibility system, the platform occupies a different position. Its service is connected to the firm’s ability to sell at all.
The distinction matters for both sides of the platform relationship. The smaller firm may own a valuable product but lack the route through which the product can be discovered and purchased. The platform owner may not have designed that product, but may control the infrastructure that connects many products to a large customer base. The two sides can therefore create value together without contributing equally critical resources. Mutual benefit does not imply equal dependence.
This is the part of the model that connects the opportunity evidence about Airbnb with the Mukako–Alibaba case. The Wiley study’s abstract describes platforms as external enablers: entry by Airbnb in 270 Italian Borghi was associated with increased surrounding entrepreneurial activity, with stronger effects in more depressed areas. The platform could change the opportunity structure by making demand reachable and by internalizing selected business processes. That is a resource benefit. The question left open is who controls the resource after entrepreneurs begin to rely on it.
For Mukako, Tmall Global was valuable precisely because the company was a foreign entrant with limited local infrastructure. The platform offered a practical route to Chinese consumers and associated selling and logistics services. Establishing a Chinese legal identity was described by the founder as an alternative with very large setup costs. Tmall therefore reduced the fixed cost and complexity of entering the market. It also became more than one marketing option: the agreement and the channel were tied to Mukako’s ability to conduct its Chinese business.
Dependence is not measured by whether the service is expensive in the abstract. A high-priced service may still be replaceable if several providers compete to supply it. Conversely, a modestly priced service may create serious dependence if the firm cannot operate without it and has no credible substitute. The relevant comparison is between the value of the resource to the dependent firm and the cost of obtaining an equivalent resource elsewhere.
That comparison has a time dimension. Before entering a market, a firm may imagine that it has several possible channels. After it invests in inventory, marketing, service routines, and customer acquisition around one platform, the alternatives may become less practical. The firm’s own success can increase the cost of switching because more of its business has been organized around the platform’s rules. Dependence can therefore deepen through integration even when the initial relationship was voluntary and beneficial.
Power appears at the interfaces
Once a platform is recognized as a critical resource, bargaining power becomes easier to analyze. Power is not simply the size or reputation of the platform owner. It appears in the interfaces where the two organizations exchange access, attention, money, information, and control. Who can change the terms? Who can wait? Who has other partners? Who bears the cost when the relationship is interrupted? These questions reveal the asymmetry more clearly than a general statement that one company is “dominant.”
The first interface is access itself. A platform may decide which firms are admitted, under what category, and with what conditions. In the Mukako case, the founder described Tmall as an essential way to sell foreign products into China and said that an exclusivity condition accompanied access. The alternative—building a Chinese legal identity—was described as costly enough to be a difficult route for a young firm. If that account is accurate, Mukako was not choosing between two equivalent channels. It was choosing between accepting the platform’s conditions and undertaking a much larger local build-out.
The second interface is visibility. A platform can make a product discoverable, but the firm may need continuing investment to remain visible once the initial boost fades. This creates a subtle form of dependence. The platform does not have to prohibit a product from being sold. It can shape the amount of attention the product receives, while the seller pays to compete for that attention. If the seller’s other marketing channels are weak, a decision about visibility becomes a decision about whether demand can be reached at all.
The third interface is the bundle of services around the transaction. Selling through a platform may involve logistics, customer service, payment, data, or other processes. Bundling can be efficient because the firm does not have to coordinate each function independently. It can also make the relationship harder to unwind. Replacing the platform then means replacing a connected system rather than a single service. The more functions are integrated, the more a change in one part can affect the firm’s whole route to market.
The fourth interface is the economic settlement. When one side has more alternatives, it can use that position to secure favorable contractual terms or capture a larger share of the value created. Resource-dependence research describes this as a possible transfer of profit margin from the power-disadvantaged firm to the power-advantaged one. The issue is not that every charge is unfair. A platform may provide real value and deserve compensation. The issue is whether the dependent firm can reject, renegotiate, or replace the terms without losing the business that the platform helped create.
The absence of alternatives is what turns a difficult negotiation into a structural constraint. If a seller can move to another provider that offers comparable customers, infrastructure, and reach, the platform must consider the cost of losing that seller. If no comparable provider exists, the seller bears more of the cost of saying no. The Springer article makes this point through Alibaba’s position in Chinese e-commerce. It reports Alibaba’s share of Chinese retail e-commerce sales as 56.6% in 2021, based on a figure reproduced from eMarketer, and interprets that position as limiting Mukako’s substitutes. The market-share figure is secondary evidence, and the article’s stronger language about monopoly is an interpretation of the case rather than an independent legal finding. Still, the underlying bargaining question is clear: a large audience and a limited number of comparable channels can give the platform owner leverage.
Switching costs reinforce that leverage. They include more than the technical work of opening a new account. A firm may have to rebuild customer awareness, renegotiate logistics, learn a new system, change marketing routines, move inventory, and accept a period of lower sales while the new channel develops. An exclusivity condition can add a contractual barrier by limiting simultaneous use of other channels. Even when a second channel exists in theory, it may not be a credible substitute if it cannot deliver comparable customers at a viable cost.
This is the practical meaning of a hold-up problem. A firm makes investments that are valuable inside a particular relationship but less valuable elsewhere. Once those investments are made, the other party may have more room to impose conditions because walking away would strand part of the investment. The Springer article connects this problem to firms that rely on powerful partners for resources necessary to their core business. The smaller firm may hesitate to invest further or improve its offering if it expects that a more powerful partner can appropriate the resulting value. Dependence can therefore weaken not only current margins but also the incentive to make future investments.
The interfaces can be viewed as one operating sequence:
The sequence does not claim that every platform relationship follows every step. It shows where dependence can accumulate. The platform supplies the resource; the firm invests around the channel; transactions generate integration; and the growing importance of that channel can leave the platform owner with more control over the conditions of continued access. In a healthier arrangement, the firm may build enough alternatives or bargaining power to keep the relationship useful without becoming trapped in it.
Customer data and pricing are additional examples of control that can matter at these interfaces. The Springer article notes that platforms often control pricing, terms of service, and access to customer data, all of which can influence a smaller firm’s performance. But the distinction between a general platform capability and a documented event in Mukako matters. The case supports a power asymmetry, reported exclusivity, limited alternatives, and dependence on Tmall; it does not provide a separate published record proving that every possible form of data or self-preferencing control was exercised in this relationship.
This evidence discipline also prevents a misleading diagnosis of the entrepreneur. It would be easy to say that Mukako should simply have negotiated harder. Yet negotiation skill cannot create a substitute channel that does not exist, remove a contractual restriction the other side can enforce, or finance an expensive local presence. Nor would refusing all powerful partners be a simple solution for a small firm entering a market where local access is difficult. The relationship can be rational at the entry stage and still require safeguards because the parties do not have equal options after integration.
A useful diagnosis therefore asks four connected questions. What resource does the platform control, and is it essential to the firm’s core activity? What credible alternatives can deliver comparable reach or infrastructure? Which decisions remain with the firm, and which are set by the platform’s rules or ranking system? Finally, does the firm retain enough margin and financing capacity to continue using the channel if visibility costs rise? The first three questions describe power; the fourth tests whether that power can become a financial threat.
The answer will often change over the firm’s life. Early platform use may be a reversible experiment: limited inventory, a defined market test, and a small share of sales. Later, the same channel may carry most of the firm’s demand, data, and customer-service routines. The more the firm’s future is tied to the platform, the less useful it is to ask only whether the platform helped it grow. The relevant judgment is whether growth has increased the firm’s ability to choose—or merely increased the amount it stands to lose if the platform changes.
That is the power hidden in the channel. The platform’s contribution is visible as access and activity. Its leverage appears in the resources the firm cannot replace, the interfaces it does not control, and the investments that become specific to the relationship. With this model in place, the apparent contradiction between platform-enabled opportunity and platform dependence can be tested directly against Mukako’s decisions and outcomes.