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The architecture of innovation: how firms configure different types of complementarities in emerging ecosystems
Abstract
Ecosystems are one of the major trends today. They are based on complementarities, which can take the form of supermodularity or uniqueness and appear on both production and consumption side. Different configurations of complementarity lead to different characteristics of ecosystems with different implications. But which configuration of complementarities is beneficial in a given setting and what are the resulting consequences? We study emerging ecosystems driven by the respective orchestrator. Based on a multiple-case study, we show how and why orchestrators are leveraging different configurations of complementarities depending on, amongst others, competition on ecosystem or value proposition level and uncertainty and the resulting challenges for the orchestrator. These insights provide researchers with a better understanding of the basic mechanics of ecosystems and explain why certain types and structures of ecosystems are more likely to be seen in specific environments. For managers, it helps to sketch the development paths for own ecosystems.
... The notion of the orchestrating actor introduces additional complexity, as different ecosystem stages may require varied orchestrators, especially highlighted in the industrial firm context (Lingens, Miehé, et al., 2021). For example, an ecosystem orchestrator may facilitate the emergence phase with specific enabling practices (Blackburn et al., 2022), while specialized orchestrators might be better equipped for subsequent phases, like commercializing the ecosystem's value proposition (Lingens, Seeholzer, et al., 2022). Second, orchestration can manifest in two forms: dominating orchestration, where orchestrators assume a visionary and directive role to shape ecosystem trajectories and interactions actively, and consensus-based orchestration, where orchestrators create a trust-based, adaptable environment allowing collaborative dynamics to steer ecosystem evolution organically (Reypens et al., 2021). ...
... The roles played by ecosystem orchestrators can be divided into market designers and market explorers (Isckia et al., 2020). As market designers, they act as architects of the emerging ecosystem, typically defining complementarity (Lingens, Seeholzer, et al., 2022). Orchestrators set system-level goals, define hierarchical distinctions among member roles, and establish standards and interfaces (Holgersson et al., 2022;Sjödin et al., 2022). ...
... Orchestrators set system-level goals, define hierarchical distinctions among member roles, and establish standards and interfaces (Holgersson et al., 2022;Sjödin et al., 2022). Ecosystem development is driven by a partially structured process led by the orchestrator (Lingens, Seeholzer, et al., 2022). Additionally, orchestrators need to transition from an inward ("ego-centric") to an outward ("eco-centric") mindset (Mann et al., 2022;Shi et al., 2023) and strive to prolong their orchestration role (Leten et al., 2013). ...
This study ventures into the dynamic realm of ecosystem orchestration for industrial firms, emphasizing its significance in maintaining competitive advantage in the digital era. The fragmented research on this important subject poses challenges for firms aiming to navigate and capitalize on ecosystem orchestration. To bridge this knowledge gap, we conducted a comprehensive qualitative meta-analysis of 31 case studies and identified multifaceted orchestration practices employed by industrial firms. The core contribution of this research is the illumination of five interdependent but interrelated orchestration practices: strategic design, relational, resource integration, technological, and innovation. Together, these practices are synthesized into an integrative framework termed the "Stirring Model," which serves as a practical guide to the orchestration practices. Furthermore, the conceptual framework clarifies the synergy between the identified practices and highlights their collective impact. This study proposes theoretical and practical implications for ecosystem orchestration literature and suggests avenues for further research.
... IEEs require various key partners that are 'minimum but viable'. Minimum-but-viable partners refer to the fact that unique value can still be created with the smallest, indispensable configuration of value complementors (Adner 2012;Lingens, Seeholzer, and Gassmann 2022). To align with key partners in the IEE, scholars have underscored the role of strategic networking capability, that is, a firm's TMT's ability to initiate, develop, and even terminate diverse collaborative relationships (Mitrega et al. 2012). ...
There is the bourgeoning literature arguing that successfully delivering complex innovations to mass societies requires focal firms and their key partners to first perform a series of experimentation activities at the local small-scale societal level, known as Innovation Ecosystem-Specific Experimentation (IEE). Scholars have already evidenced the IEEs' function to create viable innovation ecosystems , yet there is a dearth of information about which factors are associated with effective IEEs. We constructed the conceptual model based on a dynamic capabilities perspective. Our PLS-SEM analysis of 111 surveys in China indicates that (1) focal firms' dynamic capabilities in metacognition, strategic networking, and learning agility are positively correlated with effective IEEs; (2) focal firms that use geographically accessible networking and innovation facilities tend to have stronger relationships between strategic networking capability and IEE, and between learning agility and IEE, respectively. Overall, this study enriches the literature on experimentation, entrepreneurial strategizing, and innovation ecosystem emergence.
... However, no work to date has examined the value propositions of stakeholders in the longevity landscape, which is crucial to understanding their individual roles and collaborative dynamics (Lingens, Seeholzer and Gassmann, 2022). Thus, this study aims to (a) identify the healthy longevity value propositions of key stakeholders and (b) analyze their alignment as an index of potential collaboration. ...
Background: The global aging population underscores a critical need to tackle accompanying health and economic challenges, at all levels of society. This All-of-Society approach emphasizes the involvement of various stakeholders - governments, NGOs, researcher centers, private companies, local communities, and opinion leaders - to collectively promote healthy aging. However, how stakeholders enable healthy longevity remains unclear.
Objective: This study examines how global stakeholders (governments, NGOs, researcher centers, private companies, local communities, and opinion leaders) create value towards healthy longevity. We identify the healthy longevity dimension of stakeholders' value propositions and examine alignment between their propositions as an indicator of shared goals.
Methods: Following the All-of-Society approach, we analyzed the healthy longevity aspects of value propositions among the six classes of stakeholders (N=128). We (1) employed semantic topic modeling to identify the primary value proposition topics as related to healthy longevity and (2) computed proposition alignment using similarity networks.
Results: Our analysis revealed varying degrees of alignment between stakeholders' healthy longevity propositions, with the lowest alignment observed for local communities and researcher centers.
Conclusions: Findings underscore a key need to strengthen synergies between academic and community-based initiatives to promote translational science and highlight opportunities for strategic partnerships in the evolving healthy longevity field.
... Accordingly, BMI is defined as novel and non-trivial alterations to a business model's key elements (Foss and Saebi, 2017). Thus, BMI is distinct from product and process innovation (Latifi et al., 2021), enabling firms to attain competitive advantages through value logic reconfiguration in dynamic business environments (Parida et al., 2019) or ecosystems (Hellström et al., 2015;Lingens et al., 2022;Tsvetkova et al., 2014). ...
... Therefore, innovation networks are more often examined at the regional level, especially for organizations with close geographical proximity [7]. In the field of business management and industrial innovation, the main strategies of organizations in selecting partners are constructed on multiple types of complementarities [8][9][10][11]. However, in the field of higher education, complementarity is not the main causal strategy adopted by universities when selecting partners in the process of promoting inter-organizational collaborative innovation networks [12]; rather, professional proximity is more important for inter-university innovation collaboration. ...
As typical innovation organizations, the structure and efficiency of cooperation among universities’ innovation behaviors are important influencing factors for regional innovation sustainable development. In 2019, the Chinese government promulgated the “Outline of the Development Plan of The Guangdong, Hong Kong and Macao Great Bay Area”, which directly promotes a sustainable cooperation network of universities in the Great Bay Area. This study used UCINET to visualize the cooperation network of universities in Guangdong, Hong Kong, and Macao based on the cooperation data generated by 35 universities in the Guangdong–Hong Kong–Macao Great Bay Area, jointly establishing 37 professional alliances that developed 888 cooperation ties from 2017 to 2022. The results show that the current cooperative network density of universities in the Great Bay Area is high (density = 0.746), but the cohesion trend is not significant (network centralization = 26.92%); a clear circle structure has been formed. The network exhibits a narrow shape at both ends and widens in the middle; the higher the hierarchical position of universities in the region, the more likely they are to enter the core cooperation network and establish more cooperation relationships. Universities in the marginal circles find it especially difficult to initiate cooperative relationships due to their disadvantageous position in terms of limited resources and a lack of administrative intervention. The current cooperation situation still has room for expansion.
This doctoral dissertation proposal proffers three interconnected essays on the relationship between the platform owner (as the lead firm) and the born-digital firm (as the complementor firm) in the context of digital platform orchestration. Coopetition amongst complementor firms is also explored as influenced by their relationship with the lead firm-given the open innovation processes and platform governance models implemented in a digital platform. I draw upon the strategy and innovation management literatures to inform three interrelated conceptual frameworks that underscore the role of power dynamics and resource dependencies in the adoption of control and incentive mechanisms when orchestrating digital platforms in a dyadic lead-complementor firm relationship. The latter could potentially shape the governance typologies implemented by the lead firm in the orchestration of digital platforms. I also mobilize the coopetition literature delving into the educement of coopetitive behaviours amongst complementors that interact within an innovation ecosystem in view of their entrepreneurial lifespan development. In such interaction, the influence exerted by the lead-complementor firm relationship type to the complementors' coopetitive behaviour is delineated as a crucial facet vis-à-vis the platform governance model in effect. The open innovation framework is then employed to present a double-sided pathway (viz. inbound or outbound) in which the interplay of coopetitive behaviours can be observed contingent upon the complementors' position in these pathways.
Ecosystems are formed by organisations that jointly create a value proposition that a single firm could not create in isolation. To deliver this value proposition, the partners need a focal firm, the orchestrator, to be align them towards the joint value proposition. Thus, how orchestrators design the alignment structure of an ecosystem is at the very heart of the ecosystem concept-yet it has not been sufficiently addressed by extant research. This is all the more true for the question of how the design of an ecosystem is shaped depending on surrounding conditions. This paper applies a qualitative study with ten cases and, based on the attention-based view of the firm, contributes to research on ecosystems in several ways. First, it explains which ecosystem designs are beneficial under which conditions. Second, it elucidates the structure and activities within ecosystems and shows that start-ups can be just as good ecosystem orchestrators as incumbents. Third, it explains the circumstances under which single vs. multi orchestrator ecosystems occur. Fourth, it presents the conditions when incumbents or start-ups make better orchestrators. Finally, it is among the first studies to apply the attention-based view to business ecosystems, and shows that doing so yields intriguing insights into this emerging field of research.
Contrary to existing literature, startups can be successful orchestrators of ecosystems. Based on nine qualitative case studies, this article introduces four archetypes that shed light on how a startup can fulfill the tasks of an orchestrator and overcome challenges. The findings identify dimensions of standardization/customization and sources of value creation as defining the role of ecosystem orchestrators and demonstrate the consequences for small and medium-sized enterprises (SMEs), corporates, investors, and accelerators involved in such ecosystems.
This paper explores the regional innovation ecosystem (RIE) in an effort to fully understand its static and dynamic nature. We investigate how organisations coevolve within an ecosystem and how it affects their ecosystems. Based on a longitudinal, qualitative in-depth case study analysis of the three most representative Chinese RIEs, we empirically explore and validate a 4C framework. The framework includes construct, cooperation, configuration and capability and offers insights into 1) a better redistribution of roles and coordination of ecosystem resources, 2) delivering a better understanding of the dynamic and co-evolution nature of ecosystem development and 3) inspiring the practitioners to further explore their complementary partners. The key findings suggest importance of within- and inter-RIE complementarity-based collaboration, which – with appropriate and well-informed governmental support – can significantly boost the national innovation system.
Platforms power the world’s most valuable companies, but it will get harder and harder to capture and monetize their disruptive potential. Today, platform companies are in nearly every market, and they all share common features. They use digital technology to create self-sustaining positive-feedback loops that potentially increase the value of their platforms with each new participant. They build ecosystems of third-party firms and individual contractors that allow them to bypass the traditional supply chains and labor pools required by traditional companies.
Moreover, all platform companies face the same four business challenges. They must choose the key “sides” of the platform (that is, identify which market participants they want to bring together, such as buyers and sellers, or users and innovators). They must solve a chicken-or-egg problem to jump-start the network effects on which they depend. They must design a business model capable of generating revenues that exceed their costs. And finally, they must establish rules for using (and not abusing) the platform, as well as cultivating and governing the all-important ecosystem.
For all their similarities, it is possible to distinguish platforms on the basis of their principal activity. This yields two basic types: transaction and innovation platforms, with some hybrid companies that combine the two.
Intermediary organisations such as technology transfer organisations (TTOs) are an important mechanism of open ecosystem governance, as they support how ecosystem participants search for knowledge. While scholars have identified TTO activities to support knowledge search, little is known about how these activities relate to the structural dimensions of TTOs or ecosystem-level factors. We propose that ecosystem search scope and problem complexity are key ecosystem-level factors that influence how TTOs support knowledge search. We further argue that coupling, specialisation, centralisation, and formalisation are the key structural dimensions of TTOs. We combine these arguments to develop TTO designs that detail the interplay of the structural dimensions and activities of a TTO given varying ecosystem-level factors. Our paper contributes to research on the open governance of ecosystems, ecosystem structures, and the ecosystem structure–intermediary organisations relation.
The concept of innovation ecosystems has become popular during the last 15 years, leading to a debate regarding its relevance and conceptual rigor, not the least in this journal. The purpose of this article is to review received definitions of innovation ecosystems and related concepts and to propose a synthesized definition of an innovation ecosystem. The conceptual analysis identifies an unbalanced focus on complementarities, collaboration, and actors in received definitions, and among other things proposes the additional inclusion of competition, substitutes, and artifacts in conceptualizations of innovation ecosystems, leading to the following definition: An innovation ecosystem is the evolving set of actors, activities, and artifacts, and the institutions and relations, including complementary and substitute relations, that are important for the innovative performance of an actor or a population of actors. This definition is compatible with related conceptualizations of innovation systems and natural ecosystems, and the validity of it is illustrated with three empirical examples of innovation ecosystems.
The concept of an ‘ecosystem’ is increasingly used in management and business to describe collectives of heterogeneous, yet complementary organizations who jointly create some kind of system-level output, analogous to an ‘ecosystem service’ delivered by natural ecosystems, and one that extends beyond the outputs and activities of any individual participant of the ecosystem. Due to its attractiveness and elasticity, the ecosystem concept has been applied to a wide range of phenomena by a variety of scholarly perspectives and under varying monikers such as ‘innovation ecosystems’, ‘business ecosystems’, ‘technology ecosystems’, ‘platform ecosystems’, ‘entrepreneurial ecosystems’, and ‘knowledge ecosystems’. This conceptual and application heterogeneity has contributed to conceptual and terminological confusion, which threatens to undermine the utility of the concept in supporting cumulative insight.
In this article we seek to re-introduce some order into this conceptual heterogeneity by reviewing how the ecosystem concept has been applied to variably overlapping phenomena and by high-lighting key terminological and conceptual inconsistencies and their sources. We find that conceptual inconsistency in the ecosystem terminology relates to two key dimensions: the ‘unit’ of analysis and the type of ‘ecosystem service’ – i.e., the ecosystem output collectively generated. We then argue that although there is considerable heterogeneity in application, the concept nevertheless offers promise to support insights that are distinctive relative to other concepts that describe collectives of organizations, such as those of ‘industry’, ‘supply chain’, ‘cluster’, and ‘network’. We also find that despite extant proliferation, the concept nevertheless describes collectives that are distinctive in that they uniquely combine participant heterogeneity, coherence of ecosystem outputs, participant inter-dependence, and non-hierarchical governance.
Based on our identified dimensions of conceptual heterogeneity, we offer a typology of the different ecosystem concepts, thereby helping re-organize this proliferating domain. The typology is based upon three distinct ecosystem outputs—ecosystem-level value offering to a defined audience, collective generation of business model innovation, and collective generation of research-based knowledge—and three research emphases that resonate with alternative ‘units’ of analysis—community dynamics, output co-generation, and interdependence management. Together, these al-low us to clearly differentiate between the concepts of innovation ecosystems, business ecosystems, platform ecosystems, technology ecosystems, entrepreneurial ecosystems, and knowledge ecosystems. Based on the three distinct types of ecosystem outputs, our typology identifies three major types of ecosystems: innovation ecosystems, entrepreneurial ecosystems, and knowledge ecosystems. Under the rubric of ‘innovation ecosystems’, we further distinguish between business ecosystems, modular ecosystems, and platform ecosystems. We conclude by considering innovation ecosystem dynamics, highlighting the important role of digitalization, and reviewing the implications of our model for ecosystem emergence, competition, coevolution, and resilience.
Organizations are simultaneously embedded in inter-organizational networks and ecosystems, yet research on networks and ecosystems developed in isolation. The aim of this partial integration is to bring new energy into maturing research on organizational networks and
greater structure to the burgeoning research on ecosystems. In this article, we underlie similarities and differences between networks and ecosystems; bring the ecosystems’ focus on modularity and complementarity at the forefront of inter-organizational research while
enriching ecosystems scholarship with systematic applications of network analytic tools to map the patterns of component interdependencies.
This paper focuses on how companies deploy structural properties of adaptive capacity (multiplexity, redundancy and loose coupling) to cope with the phenomenon of internal challenges of Open Innovation (OI) implementation, i.e. organisational and cultural changes. We developed a single case study, which offered significant findings. First, the multiplexity of relationships in OI settings helps to face the challenges of organisational and cultural changes by triggering trust formation and interaction. Second, redundancy has twofold elements: institutional logics redundancy triggers cultural change challenges which can be overcome through management practices and communications; task redundancy facilitates knowledge sharing and collaboration, thus helping to deal with organisational change challenges. Finally, loose coupling in OI settings facilitates social interconnectedness among members through management practices, helping to face organisational and cultural change challenges. We provide managerial and theoretical implication to deal with the challenges of OI in relation to both organisational and cultural changes.
We explore value co-creation in ecosystems from three broad disciplinary perspectives: those of strategic management, service marketing, and information systems. These perspectives offer complementary insights into what is a complex phenomenon. We consider the premises, underlying theoretical considerations, insights, and contributions of each, identify commonalities and complementarities, and suggest directions for future research agenda.
The emergence of digital platforms and ecosystems (DPE) as a venue for value creation and capture for multinational enterprises holds considerable implications for the theory and practice of international business. In this paper, we articulate these implications by considering the dual perspectives of cross-border platforms and ecosystems-as a venue for multifaceted innovation and as multisided marketplace-and focusing on three overarching themes at the intersection of DPEs and international business, that is, DPEs as affording new ways of internationalization, as facilitating new ways of building knowledge and relationships, and as enabling new ways of creating and delivering value to global customers. We explain specific DPE-related concepts and constructs that underlie these themes and discuss how they could be incorporated into existing IB theories in ways that would enhance their richness and continued relevance as well as their ability to better predict a multitude of emerging IB phenomena.
Abstract The objective of this article is to introduce readers to the emerging research stream on business ecosystems, explicating the novelty and the usefulness of ecosystem-based theorizing, and hoping to pave the way for an influential but cumulative body of knowledge. The key tenets within an ecosystem-based perspective are outlined and used to contrast this emerging perspective from other established perspectives of value chains, supply chains, alliances, and networks. The article concludes by discussing the research approaches that can be employed to study ecosystems and the implications for organization design.
Research Summary
The recent surge of interest in “ecosystems” in strategy research and practice has mainly focused on what ecosystems are and how they operate. We complement this literature by considering when and why ecosystems emerge, and what makes them distinct from other governance forms. We argue that modularity enables ecosystem emergence, as it allows a set of distinct yet interdependent organizations to coordinate without full hierarchical fiat. We show how ecosystems address multilateral dependences based on various types of complementarities ‐ supermodular or unique, unidirectional or bidirectional, which determine the ecosystem's value‐add. We argue that at the core of ecosystems lie non‐generic complementarities, and the creation of sets of roles that face similar rules. We conclude with implications for mainstream strategy and suggestions for future research.
Managerial summary
We consider what makes ecosystems different from other business constellations, including markets, alliances or hierarchically managed supply chains. Ecosystems, we posit, are interacting organizations, enabled by modularity, not hierarchically managed, bound together by the non‐redeployability of their collective investment elsewhere. Ecosystems add value as they allow managers to coordinate their multilateral dependence through sets of roles that face similar rules, thus obviating the need to enter into customized contractual agreements with each partner. We explain how different types of complementarities (unique or supermodular, generic or specific, uni‐ or bi‐directional) shape ecosystems, and offer a “theory of ecosystems” that can explain what they are, when they emerge and why alignment occurs. Finally, we outline the critical factors affecting ecosystem emergence, evolution, and success ‐‐ or failure.
Innovation ecosystems are increasingly regarded as important vehicles to create and capture value from complex value propositions. While current literature assumes these value propositions can be known ex-ante and an appropriate ecosystem design derived from them, we focus instead on generative technological innovations that enable an unbounded range of potential value propositions, hence offering no clear guidance to firms. To illustrate our arguments, we inductively study two organizations, each attempting to create two novel ecosystems around new technological enablers deep in their industry architecture. We highlight how ecosystem creation in such conditions is a systemic process driven by coupled feedback loops, which organizations must try to control dynamically: firms first make the switch to creating the ecosystem following an external pull to narrow down the range of potential applications; then need to learn to keep up with ecosystem dynamics by roadmapping and preempting, while simultaneously enacting resonance. Dynamic control further entails counteracting the drifting away of the nascent ecosystem from the firm's idea of future value creation and the sliding of its intended control points for value capture. Our findings shed new light on strategy and control in emerging ecosystems, and provide guidance to managers on playing the ecosystem game.
Over the past 20 years, the term “ecosystem” has become pervasive in discussions of strategy, both scholarly and applied. Its rise has mirrored an increasing interest and concern among both researchers and managers with interdependence across organizations and activities. This article presents a structuralist approach to conceptualizing the ecosystem construct. It presents a clear definition of the ecosystem construct, a grammar for characterizing ecosystem structure, and a characterization of the distinctive aspects of ecosystem strategy. This approach offers an explicit examination of the relationship among ecosystems and a host of alternative constructs (business models, platforms, coopetition, multisided markets, networks, technology systems, supply chains, value networks) that helps characterize where the ecosystem construct adds, and does not add, insight for the strategy literature.
This paper provides an overview of the main perspectives and themes emerging in research on open innovation (OI). The paper is the result of a collaborative process among several OI scholars – having a common basis in the recurrent Professional Development Workshop on ‘Researching Open Innovation’ at the Annual Meeting of the Academy of Management. In this paper, we present opportunities for future research on OI, organised at different levels of analysis. We discuss some of the contingencies at these different levels, and argue that future research needs to study OI – originally an organisational-level phenomenon – across multiple levels of analysis. While our integrative framework allows comparing, contrasting and integrating various perspectives at different levels of analysis, further theorising will be needed to advance OI research. On this basis, we propose some new research categories as well as questions for future research – particularly those that span across research domains that have so far developed in isolation.
An integrative framework is proposed to advance management research on technological platforms, bridging two theoretical perspectives: economics, which sees platforms as double-sided markets, and engineering design, which sees platforms as technological architectures. While the economic perspective informs our understanding of platform competition, the engineering design perspective informs our view of platform innovation. The article argues that platforms can be usefully conceptualized as evolving organizations or meta-organizations that: (1) federate and coordinate constitutive agents who can innovate and compete; (2) create value by generating and harnessing economies of scope in supply or/and in demand; and (3) entail a modular technological architecture composed of a core and a periphery. In support of this conceptualization, a classification system is presented, indicating that technological platforms appear in a variety of organizational forms: within firms, across supply chains, and across industry innovation ecosystems. As an illustration, the framework is then applied to derive a simple model highlighting patterns of interaction between platform innovation and competition, yielding hypotheses that could be tested empirically by future scholars.
This article reviews and discusses the empirical literature on interorganizational networks at the network level of analysis, or what is sometimes referred to as “whole” networks. An overview of the distinction between egocentric and network-level research is first introduced. Then, a review of the modest literature on whole networks is undertaken, along with a summary table outlining the main findings based on a thorough literature search. Finally, the authors offer a discussion concerning what future directions might be taken by researchers hoping to expand this important, but understudied, topic.
How can firms profitably give away free products? This paper provides a novel answer and articulates trade-offs in a space of information product design. We introduce a formal model of two-sided network externalities based in textbook economics—a mix of Katz and Shapiro network effects, price discrimination, and product differentiation. Externality-based complements, however, exploit a different mechanism than either tying or lock-in even as they help to explain many recent strategies such as those of firms selling operating systems, Internet browsers, games, music, and video.
The model presented here argues for three simple but useful results. First, even in the absence of competition, a firm can rationally invest in a product it intends to give away into perpetuity. Second, we identify distinct markets for content providers and end consumers and show that either can be a candidate for a free good. Third, product coupling across markets can increase consumer welfare even as it increases firm profits.
The model also generates testable hypotheses on the size and direction of network effects while offering insights to regulators seeking to apply antitrust law to network markets.
Empirical research on complementarity between organizational design decisions has traditionally focused on the question of existence of complementarity. In this paper, we take a broader approach to the issue, combining a "productivity" and an "adoption" approach, while including a search for contextual variables in the firm's strategy that affects complementarity. Analysis of contextual variables is not only interesting per se, but also improves the productivity test for the existence of complementarity. We use our empirical methodology to analyze complementarity between innovation activities: internal research and development (R& D) and external knowledge acquisition. Our results suggest that internal R& D and external knowledge acquisition are complementary innovation activities, but that the degree of complementarity is sensitive to other elements of the firm's strategic environment. We identify reliance on basic R& D--the importance of universities and research centers as an information source for the innovation process--as an important contextual variable affecting complementarity between internal and external innovation activities.
There are often benefits to consumers and to firms from standardization of a product. We examine whether these standardization benefits can "trap" an industry in an obsolete or inferior standard when there is a better alternative available. With complete information and identical preferences among firms the answer is no; but when information is incomplete this "excess inertia" can occur. We also discuss the extent to which the problem can be overcome by communication.
Much has been written about networks, strategic alliances, and virtual organizations. Yet these currently popular frameworks provide little systematic assistance when it comes to out-innovating the competition. That's because most managers still view the problem in the old way: companies go head-to-head in an industry, battling for market share. James Moore sets up a new metaphor for competition drawn from the study of biology and social systems. He suggests that a company be viewed not as a member of a single industry but as a part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies "co-evolve" around a new innovation, working cooperatively and competitively to support new products and satisfy customer needs. Apple Computer, for example, leads an ecosystem that covers personal computers, consumer electronics, information, and communications. In any larger business environment, several ecosystems may vie for survival and dominance, such as the IBM and Apple ecosystems in personal computers or Wal-Mart and K mart in discount retailing. In fact, it's largely competition among business ecosystems, not individual companies, that's fueling today's industrial transformation. Managers can't afford to ignore the birth of new ecosystems or the competition among those that already exist. Whether that means investing in the right new technology, signing on suppliers to expand a growing business, developing crucial elements of value to maintain leadership, or incorporating new innovations to fend off obsolescence, executives must understand the evolutionary stages all business ecosystems go through and, more important, how to direct those changes.
The authors study a rich class of noncooperative games that includes models of oligopoly competition, macroeconomic coordination failures, arms races, bank runs, technology adoption and diffusion, R&D competition, pretrial bargaining, coordination in teams, and many others. For all these games, the sets of pure strategy Nash equilibria, correlated equilibria, and rationalizable strategies have identical bounds. Also, for a class of models of dynamic adaptive choice behavior that encompasses both best-response dynamics and Bayesian learning, the players' choices lie eventually within the same bounds. These bounds are shown to vary monotonically with certain exogenous parameters. Copyright 1990 by The Econometric Society.
We explore the growth, scope and impact of the academic literature that has arisen around the concept of innovation ecosystems. We highlight some of the most important definition, the place of innovation policies and the future accomplishments that could be made.
Over the past three decades, platform competition—the competition between firms that facilitate transactions and govern interactions between two or more distinct user groups who are connected via an indirect network—has attracted significant interest from the fields of management and organizations, information systems, economics, and marketing. Despite common interests in research questions, methodologies, and empirical contexts by scholars from across these fields, the literature has developed mostly in isolated fashion. This article offers a systematic and interdisciplinary review of the literature on platform competition by analyzing a sample of 333 articles published between 1985 and 2019. The review contributes by (a) documenting how the literature on platform competition has evolved; (b) outlining four themes of shared scholarly interest, including how network effects generate “winner-takes-all” dynamics that influence strategies, such as pricing and quality; how network externalities and platform strategy interact with corporate-level decisions, such as vertical integration or diversification into complementary goods; how heterogeneity in the platform and its users influences platform dynamics; and how the platform “hub” orchestrates value creation and capture in the overall ecosystem; and (c) highlighting several areas for future research. The review aims to facilitate a broader understanding of the platform competition research that helps to advance our knowledge of how platforms compete to create and capture value.
As a response to the call for cumulative knowledge in ecosystem research, this paper focuses on ecosystem literature from the perspective of a focal firm. Through an in-depth analysis of modern and classic ecosystem conceptual works, this paper clarifies the theoretical underpinnings of the structure view and the coevolution view of ecosystems. Whereas according to the structure view an ecosystem features a modular structure of multilateral interdependences, coevolutionists envisage it as a community of affiliated and interacting actors which keeps open exchange with environments. To deal with this tension, instead of proposing an integrative or overarching ecosystem definition, this research offers an integrative framework which can accommodate the merits of both views. We do so by suggesting that 1) the coevolution view helps understand where value proposition and complementarities come from and how they come about; 2) the structure view infuses granularity into the coevolution view to specify the ecosystem affiliation as a premise on which coevolution can be orchestrated; 3) affiliation plays the role as a linking concept between the two views, allowing for the focal firm's continuous innovation to be explained.
The concept of ecosystem plays a central role in the recent debates on the unfolding of a new regime of innovation. In this paper, we contribute to these debates by clarifying the distinction between the emerging concept of ‘ecosystem of innovation’ from the established concept of ‘business ecosystems.’ Re-interpreting the case of the historical developments of the video game cluster of Montreal, we argue that the dynamics of knowledge creation and innovation in ‘ecosystems of innovation’ imply to adopt a wider scope and address knowledge flows between a diverse set of business ecosystems and between a business ecosystem and less formalised spaces dedicated to knowledge creation and exploration. We conclude suggesting the complementarity of ‘ecosystems of innovation’ with ‘business ecosystems’ and their generativity fuelled by creative tensions between formal and informal loci of knowledge creation, illustrated by diverse talent trajectories.
Platform-based technology ecosystems are new forms of organizing independent actors’ innovations around a stable product system. This collective organization is proving superior to traditional, vertically integrated systems in many sectors because of greater “generativity”—the ecosystem’s capacity to foster complementary innovation from autonomous, heterogeneous firms—which extends the usage scope and value of the platform to users. However, greater generativity can also lead to greater variance in the way ecosystem members’ contributions satisfy users’ needs, and it could potentially hinder the ecosystems’ value creation. We draw on collective action theory to examine generativity’s impact on user satisfaction and the mechanisms driving it. We argue that products enhancing user satisfaction contribute to a collective, shared asset, the platform system reputation, from which all participants benefit. Thus, generativity has both a positive (system reputation) and negative (free-riding) effect on the ecosystem members’ incentives for developing products that enhance user satisfaction. We argue that the negative free-riding effect prevails as the platform system matures and competition with alternative platform systems increases. Using data from the video game industry, we find supportive evidence for the free-riding effect, which generates an average loss in total revenue for first-rate games of about $36.5 million and a drop of about 3.3% in the console’s market share. By identifying the conditions that exacerbate free riding in platform ecosystems, our study contributes to the understanding of the evolutionary dynamics of platform ecosystems. It also highlights one feedback mechanism governing collective action in ecosystems and its implications for value creation.
Research Summary
Despite a wealth of research on competitive and cooperative strategy, gaps remain with respect to how firms successfully navigate cooperation and competition over time. This is especially true in ecosystems, in which firms depend on one another to collectively provide components and create value for consumers. Through an in‐depth multiple case study of five firms in the U.S. residential solar industry from 2007 to 2014, we induct a theoretical framework that explains how firms navigate nascent ecosystems over time. We identify three strategies, each with a distinct balance of cooperation and competition, as well as unique advantages, disadvantages, and required capabilities. Overall, we contribute to research on ecosystem strategy, crystallize the pivotal role of bottlenecks, and shed light on the dynamic interplay of cooperation and competition.
Managerial Summary
Competition and cooperation are fundamental to strategy, and often closely intertwined. But how firms navigate and balance cooperation and competition over time, especially in ecosystems where firms depend on one another to deliver value to consumers, is unclear. In this article, we conduct an in‐depth multiple‐case study of five firms in the U.S. residential solar industry to examine how firms can successfully navigate nascent ecosystems over time. We identify three distinct strategies, each with a distinct balance of cooperation and competition, and examine the unique advantages, disadvantages, and required capabilities of each. In doing so, we also contribute novel insights into the evolution of ecosystems and bottlenecks.
A business ecosystem is made up of interdependent firms using common standards and collectively providing goods and services to their customers. The effective engagement of ecosystem participants requires some level of ecosystem management, including rules for participation by other firms. The supporting institutions and enterprises that provide the foundations for ecosystems are usually harnessed by a lead innovator who provides vision, financial resources, technological assets and coordinating mechanisms, including common standards. The health of each firm in the ecosystem depends on the vitality of all firms that share the system. To thrive over time, the system must adapt to changes in the business environment through the intentional acts and coordination efforts of managers and entrepreneurs.
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Alliance portfolios are ubiquitous and influential for firm performance. Extant research addresses attributes of high-performing alliance portfolios but not how executives originate such portfolios. In our inductive case study of six entrepreneurial rivals in the wireless gaming industry, we find that executives are more likely to originate high-performing portfolios when they visualize their portfolios in the context of the entire industry as opposed to a series of single ties and when they simultaneously form ties with multiple partners. The emergent theoretical framework emphasizes agency and strategic action in contrast to a deterministic account of dyadic interdependence and social embeddedness.
In today's interconnected world, a web of entities rather than predominantly a single firm coordinates a set of activities that deliver utility to mutually connected consumers, thus creating ecosystems. In this article, we suggest that in the current, ecosystem-based production and consumption environment it is important to identify a new set of factors that determines business success. We then propose that in order to develop a network-centric strategic mindset it is important to make a transition from the notion of firm-based competitive advantage to ecosystem-based nodal advantage by which products, services, or processes held by a single firm and affecting one or more ecosystems are exploited individually to improve business. To this end, we offer a new set of five forces that are likely to affect not only a node's financial profitability but also its vulnerability within its ecosystem and the survival of the ecosystem itself. Based on these forces, we recommend strategic triangulation and the formulation of policies to prevent infra-nodal substitution, increase nodal stranglehold, and improve nimbleness to accommodate ecosystemic transitions.
The literature on alliances has identified a variety of inter-firm antecedents of performance, including information and knowledge sharing between partners, shared partner understanding, and a focus on collective objectives. Recent studies have focused on alliance management capabilities (AMC) – firms' abilities to capture, share, store and apply alliance management knowledge – as an important antecedent of performance. This paper reviews 90 studies on AMC and makes two important contributions to the literature. First, the review provides an overview of and classification scheme for the different types of AMC to better organise the diverse empirical findings that have been presented in the literature. The novel classification distinguishes between general and partner-specific AMC and between AMC stored within the firm and within the alliance. Second, consistent with the dynamic capabilities perspective, this paper offers a more detailed understanding of why AMC improve performance, by highlighting the intermediate impact of AMC on alliance attributes. In particular, the review demonstrates how the different categories of AMC influence alliances in terms of information and knowledge-sharing between partners, shared partner understanding and the pursuit of collective goals. The review also demonstrates that these attributes improve performance. The authors note promising avenues for future empirical research that involve combining the classification scheme with research on the impact of AMC on alliance attributes and performance.
There is much controversy in the literature over the relationship between the openness of firms' innovation strategies and firm characteristics such as size, R&D intensity and sector. We argue that the controversy arises because, both theoretically and empirically, only a binary, open vs. closed, strategy has been considered. In this paper, we distinguish among three firm strategies: open, semi-open and closed, drawing upon a panel of Spanish firms (2004–2006) using data from Community Innovation Survey (CIS)-type surveys, and two different indicators of openness. Our results show that open innovators are smaller and less R&D intensive than semi-open ones, although larger and more R&D intensive than closed innovators. These results reduce some of the controversies, and show that two conflicting forces, absorptive capacity and a “need” effect, are at stake in open innovation strategies.
This paper describes the process of inducting theory using case studies-from specifying the research questions to reaching closure. Some features of the process, such as problem definition and construct validation, are similar to hypothesis-testing research. Others, such as within-case analysis and replication logic, are unique to the inductive, case-oriented process. Overall, the process described here is highly iterative and tightly linked to data. This research approach is especially appropriate in new topic areas. The resultant theory is often novel, testable, and empirically valid. Finally, framebreaking insights, the tests of good theory (e.g., parsimony, logical coherence), and convincing grounding in the evidence are the key criteria for evaluating this type of research.
This paper attempts to explain why innovating firms often fail to obtain significant economic returns from an innovation, while customers, imitators and other industry participants benefit Business strategy — particularly as it relates to the firm's decision to integrate and collaborate — is shown to be an important factor. The paper demonstrates that when imitation is easy, markets don't work well, and the profits from innovation may accrue to the owners of certain complementary assets, rather than to the developers of the intellectual property. This speaks to the need, in certain cases, for the innovating firm to establish a prior position in these complementary assets. The paper also indicates that innovators with new products and processes which provide value to consumers may sometimes be so ill positioned in the market that they necessarily will fail. The analysis provides a theoretical foundation for the proposition that manufacturing often matters, particularly to innovating nations. Innovating firms without the requisite manufacturing and related capacities may die, even though they are the best at innovation. Implications for trade policy and domestic economic policy are examined.
In biotechnology, large firms enter into different kinds of linkages with universities and small/medium sized research-intensive firms. The authors test the hypothesis that the strategies of external linkage of the large firms with other parties are complementary to one another. They show that if any two strategies are complementary (i.e., undertaking more of one strategy raises the marginal value of the other), then they are positively correlated. Using data for a sample of large U.S., European, and Japanese chemical and pharmaceutical producers, the authors find that the strategies above are positively correlated even after controlling for firm-specific characteristics. Copyright 1990 by Blackwell Publishing Ltd.
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