The Rise of Digital Monopolies: A Historical-Institutionalist Perspective

Abstract The internet economy is characterized by the pervasive dominance of digital monopolies such as Alphabet, Meta and Uber, all of which hold substantial market power. The most common explanations for the rise of these monopolies emphasize external network effects, economies of scale, technological barriers to entry, user lock-in and inadequate antitrust regulation. Although these explanations may accurately describe the current situation, they are insufficient to fully account for the emergence of digital monopolies. Furthermore, existing frameworks largely overlook the possible significance of institutionalized, internet-specific patterns of consumer behaviour. This article puts forward an alternative historical-institutional argument. It contends that the internet’s legacy as a non-commercial infrastructure, combined with users’ initial reluctance to pay for online services, created market conditions in which network effects became particularly significant. From this perspective, the specific trajectory of change, including the emergence of multi-sided digital platforms, the growing separation of use value from exchange value, and the parasitic extension of digital market logic into the offline economy, can be understood as consequences of these initial market conditions. Digital monopolization therefore appears not to be the outcome of network effects culminating in “natural” monopoly, but rather the result of a historically specific sequence in which network effects themselves emerged from initial conditions that were contingent on the historical context.