Value Creation Tradeoff in Business Ecosystems: Leveraging Complementarities While Managing Interdependencies

Shiva Agarwal () and Rahul Kapoor ()
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Shiva Agarwal: McCombs School of Business, The University of Texas at Austin, Austin, Texas 78705
Rahul Kapoor: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Organization Science, 2023, vol. 34, issue 3, 1216-1242

Abstract: Complementary assets play an important role in shaping an innovation’s commercialization success. In this paper, we broaden the locus of complementarities to examine the role of complementary technologies residing in the business ecosystems that are becoming an important source of value creation for innovating firms. We argue that, on one hand, complementary technologies help innovations create more value for their users. On the other hand, they can also limit the focal innovation’s value creation by exposing them to performance bottlenecks as the underlying technological architecture of the ecosystem evolves. We further extend the notion of specialization of complementary assets to ecosystems by considering complementary technologies that are specialized to a focal ecosystem and those that are available across multiple ecosystems. We highlight that, although the complementary technologies that are specialized to an ecosystem facilitate greater value creation, they are more likely to subject the focal innovation to performance bottlenecks. Evidence from 244,034 apps launched by software developers for Apple’s iPhone ecosystem during 2008–2015 offers strong support for our framework. In summary, the study sheds light on the value creation tradeoff for firms innovating in business ecosystems—the opportunities associated with leveraging complementarities and the challenges associated with managing technological interdependencies.

Keywords: innovation; business ecosystems; organizing for innovation in the digitized world; complementary assets (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:34:y:2023:i:3:p:1216-1242

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