The Brazilian platform economy: innovation or imitation?

Researchers employ algorithmic techniques over an international database to compile a comprehensive dataset featuring over 500 Brazilian digital platform companies in order to shed light on the Brazilian digital platform economy and imitation practices

Victo José da Silva Neto[1]

Tulio Chiarini[2]

Digital platforms have firmly established themselves in the public opinion as synonymous for digital innovation. The mystique surrounding this new type of organizational entities has been reinforced by universities, companies and governments. Notably in Brazil, the recent editions of the Brazilian Digital Transformation Strategy, known as E-Digital, and the New Industrial Policy unveiled by the National Council of Industrial Development (CNDI) prominently spotlight digital platforms as pivotal and innovative entities in the contemporary landscape. Within the private sector, these digital platforms are valued as agile and innovative, often raising substantial amounts of venture capital investments.

Nevertheless, it is common for these Brazilian digital platform companies to be compared with their foreign counterparts, which, while not exactly identical, bear striking similarities. In such instances, the question arises: are we still discussing genuine and breakthrough innovation, or are we witnessing a form of imitation?

In a certain sense, the platformization process has been standardized, and digital platforms have been disseminated and have become one of the predominant organizational forms in the digital age. In the words of Carlota Perez’s Technological Revolution theory, they embody a new “organizational paradigm”.

This, in turn, paves the way for entrepreneurs to be inspired by the same organizational model in different sectors and geographical boundaries. A colloquial expression capturing this phenomenon is "Uber for this or Uber for that" like the Brazilian "Uber do Boi" (the Uboi platform) for cattle. Despite the interesting anecdote, empirical evidence supporting this notion remains scarce. Now, we employed algorithmic techniques over an international database to compile a comprehensive dataset featuring over 500 Brazilian digital platform companies and we believe that this data might shed light on the Brazilian digital platform economy and imitation practices.

Imitation in ST&I studies

In the field of Science, Technology, and Innovation (ST&I) studies, the use of imitation practices stands out as a recurring strategy employed by both companies striving to compete with incumbents and governments endeavoring to bridge the technological gap with relatively more technologically advanced countries. This concept is well-illustrated by numerous historical instances, one of which can be exemplified in David Landes’ seminal work “The Unbound Prometheus”. Landes outlines how cutting-edge technologies during the English Industrial Revolution were disseminated through the practice of imitation, as he notes “At first, the mainland [European] producers were essentially copyists [i.e., imitators], reproducing [i.e., imitating] English models with negligible alteration”.

This imitation pattern was similarly observed in South Korea during the 1980s, as shown in Linsu Kim’s “Imitation to Innovation”. Kim depicts the reverse-engineering capabilities of Korean companies, highlighting their ability to imitate Fordist Paradigm technologies and manufacture cheap copies. The imitation strategy also played a crucial role in the technological advancement of other countries, as argued by Alice Amsden in “The Rise of the Rest”. According to her, Mexico, Brazil, and Argentina effectively imitated the principle of mass production model during the import substitution process.

Recently, Chinese industrial firms skillfully combined innovation and imitation strategies in their new product development endeavors, catalyzing China’s rise as a dynamic force in several sectors, such as the space industry. In fact, Eduardo Viotti asserts that, for developing countries, the conventional concept of “National Innovation Systems” can be misleading. He advocates for the idea of “National Learning Systems”, emphasizing that learning involves the dissemination of pre-existing technologies and organizational models. Therefore, imitation not only tends to be overlooked in the ST&I literature, but may, in fact, play an even more significant role depending on one’s position relative to the technological frontier.

The great wave of digital imitation

In the evolving technological paradigm shaped by advancements in AI-based technologies, cloud computing, and big data, a new organizational model has emerged – digital platforms. This model stands in contrast to the traditional pipeline structure. In the pipeline model, prevalent during the mass production era, companies acquire resources, transform them, and introduce a finished product to the market. In contrast, the platform model assigns companies a different role. They become orchestrators, connecting resource providers and seekers, embodying functions as facilitators, intermediaries, market-makers, and market-managers, as detailed by Parker and colleagues in “Platform Revolution”. Given that these activities are fully or partially virtual, these companies assume a strategic position, serving as hubs for the centralized flow of data. Consequently, they have internal resources, technology, and data access – key components fueling digital innovation.

Leveraging this privileged position, platforms emerged as consistent disruptors across various industries. Starting with e-commerce in the 1990s, they soon expanded into the realm of social media with the Internet’s early 2000s boom. Then the model was replicated in the transport sector (ride-hailing, carpooling) and hospitality. The valuation of these companies has grown dramatically. Their rapid scaling, relying on network effects and an asset-light model, allowed some of them to go from zero to billions in just a few years – for instance, Instagram was acquired by Facebook for USD1 billion in 2012.

The platformization wave spread to various sectors, surging into education, health, group buying, entertainment, gaming, and beyond. While this sectoral imitation primarily unfolded in the USA, a parallel geographical diffusion was initiated. Platform companies began to be founded worldwide, challenging their US counterparts, such as the Chinese e-commerce platforms. Some even emerged in entirely novel markets, as Spotify developed in Sweden, which revolutionized the music industry with its streaming platform.

Unfortunately, there is a scarcity of studies examining the platformization phenomenon through the lens of innovation and imitation. Marc Hasselwander and colleagues conducted a study of the diffusion of platformization in the transport segment, revealing that in fiercely competitive markets like ride-hailing, platformization rapidly spreads via a global leader. This leader internationalizes by entering multiple markets simultaneously, followed by numerous imitators replicating the leader's model – albeit initially focusing on their domestic market. In contrast, in less replicable and scalable markets (e.g., carpooling, mobility-as-a-service), the platform model diffuses more slowly, unfolding in each domestic market without a dominant global leader.

Yang Zhao and colleagues scrutinize the innovation and imitation dynamics of platforms in the group buying niche. Their findings highlight that platform leaders leverage innovation and imitation to create complex business model designs. In an illustrative study, Augustine Peprah explores Jumia, the pan-African digital marketplace based in Lagos, that follows the footsteps of Amazon. Her research uncovers that imitation is at the core of Jumia’s strategy, but distinct social and institutional contexts compel the platform to adapt – a model termed “imitate-but-modify".

Despite these initial insights, our understanding of platform model imitation remains limited. This is a cause for concern, as policy makers might be directing public resources towards fostering innovation, overlooking the potentially significant role that imitation plays in this context.

What can we say about the Brazilian platform companies?

Would the Brazilian platformization carve its unique trajectory, or would it imitate the markets already platformed globally? Compiling a dataset encompassing over 550 Brazilian platform companies enabled us to explore this topic. A glance at the top-20 Brazilian platform companies, measured by funding, reveals a trend (Table 1): they all emerged after analogous platforms had already taken root.

Take iFood, for instance, founded in 2011, seven years after the inception of GrubHub. Consider Trocafone, the largest marketplace platform of used phones in Brazil, established in 2014 – four years following the foundation of Swappa in the US, a marketplace for individuals seeking to buy and sell used smartphones. The Brazilian real estate marketplaces Loft (2018), Viva Real (2009) and Em Casa (2018) also follow suit – they were all established years after Zillow.

In addition to the top-20, our analysis extends to mapping other pairs of innovators and imitators within our sample (Table 2). Testaisso, founded in 2013, emerged after Amazon Mechanical Turk, established in 2005, pioneered online microwork. Numerous other instances mirror this trend, as per Tables 1 and 2.

Table 1: Foreign and top-20 biggest Brazilian digital platform companies operating in the same markets

Table 1

Source: Authors’ own. Data sourced from Crunchbase

Table 2: Other selected foreign and Brazilian digital platform companies operating in the same markets

Table 2

Source: Authors’ own. Data sourced from Crunchbase

That all said, we are not affirming that Brazilian platform companies are mere replicas of counterparts from other countries, especially from the US. They boast unique application programming interfaces, distinct technological components, and content. Nevertheless, they effectively coordinate similar markets, and understanding the degree of imitation warrants deeper investigations.

So what? Why understanding innovation/imitation is relevant

According to the Oslo Manual, there are three distinct types of innovation regarding its novelty and impacts – new to the firm only, new to the firm’s markets, or new to the world. Examining the Brazilian digital platforms showcased in Tables 1 and 2 reveals a spectrum ranging from "new to the firm only" to "new to the firm's markets".

Take ride-hailing, for instance, which represents an innovation within the domestic market. 99, formerly called 99 Taxi, was established in 2012 (and acquired by the Chinese company Didi Chuxing in 2018), while Uber was established in the US in 2009. Therefore, we could infer that 99, being launched three years after Uber, is an imitation of Uber’s model. However, 99 was the first to take platformization to the Brazilian ride-hailing sector, since Uber arrived in Brazil in 2014. Once Uber arrived in the country, 99 explicitly imitated some of Uber’s strategy. Is this imitation or innovation?

Other innovation cases, such as Brazilian online gig work platforms, are clearly "new to the firm only": as the service is 100% transacted online, since the founding of Upwork in 1999 (still as Elance-oDesk), the service was already available in Brazil. Thus, the founding of 99freelas platform in 2014 did not bring innovation to the Brazilian market.

We begin to qualify the nature of platformization unfolding in Brazil. While all forms of innovation are significant, it is crucial to recognize the qualitative distinctions among innovations solely to the firm, those impacting domestic markets, and those reverberating globally. Moreover, understanding the specific scenarios where diverse innovation types emerge is paramount. Perhaps innovation geared toward the domestic market thrives in sectors where local network effects shield national initiatives from foreign platform companies. If so, exploring sectors where local network effects surpass those between countries could serve as a strategic avenue for fostering the development of the Brazilian digital economy.

If imitation indeed serves as the guiding concept for Brazilian platformization, it becomes imperative to discern the channels through which this imitation is made possible. Does the involvement of international investors play a role in facilitating imitation within Brazilian platform companies? Or is personal contact between Brazilian and foreign founders more important? Does the success of imitation hinge on the presence of an established foreign platform in the national market? Will Brazilian platforms be able to “imitate-but-modify"? Addressing these questions is crucial for shaping adequate strategies and public policies towards the Brazilian platform economy.

[1] Radboud University's Interdisciplinary Research Hub on Digitalization and Society.

[2] CTS-Ipea.