Small Digital Business in Electronic Markets: A Blueprint for Survival

The blossoming digital economy provides many golden opportunities for small businesses. However, two sets of issues have a significant impact on competition in electronic markets: one is the cost of technology infrastructure, the other is information asymmetry. These problems may lead to a market of natural monopolies with a few well-established brand names in the digital economy. Therefore, we propose a framework that will help small digital companies grow and compete in the electronic marketplace. Specifically, to address the problems mentioned above, different digital companies can specialize in different core products and collaborate through digital intermediaries’ services, avoiding the need of building an extensive technology infrastructure on their own. Meanwhile, trusted third parties help reduce information asymmetry by providing authentication and reputation services.