Digital Platform Governance and Power Asymmetry: The Impact of Algorithmic Contracts on MSME Partner Performance and Partnership Viability

Abstract

Digital platforms represent essential market infrastructure for Micro, Small, and Medium Enterprises (MSMEs), yet platform ecosystems are inherently characterized by extreme power asymmetries and unilateral algorithmic governance. This study examines the impact of digital platform governance on MSME partner performance, investigates the mediating role of partnership relationship quality, and evaluates the moderating effect of platform dependency. Utilizing an explanatory survey, empirical data were gathered from 260 MSME merchants operating across e-commerce and food-delivery platforms in North Sulawesi and Eastern Indonesia. Data were evaluated via Partial Least Squares Structural Equation Modeling (PLS-SEM) using SmartPLS 4.0. Empirical results indicate that: (1) platform governance positively and significantly enhances partnership quality (β = 0.542; p < 0.001) and MSME partner performance (β = 0.235; p < 0.001); (2) partnership quality substantially boosts partner performance (β = 0.486; p < 0.001); (3) partnership quality significantly mediates the link between platform governance and MSME performance (indirect effect β = 0.263; p < 0.001); and (4) platform dependency negatively moderates the impact of partnership quality on partner performance (β = -0.172; p < 0.01), indicating that excessive dependency diminishes partnership benefits due to structural bargaining vulnerabilities. The model accounts for 63.4% of the variance in MSME partner performance (R² = 0.634). These findings highlight the pressing need for transparent algorithmic governance and regulatory guardrails to prevent exploitation and foster inclusive platform ecosystems.