The success of an innovating firm often depends on the efforts of other innovators in its environment. How do the challenges faced by external innovators affect the focal firm's outcomes? To address ...this question we first characterize the external environment according to the structure of interdependence. We follow the flow of inputs and outputs in the ecosystem to distinguish between upstream components that are bundled by the focal firm, and downstream complements that are bundled by the firm's customers. We hypothesize that the effects of external innovation challenges depend not only on their magnitude, but also on their location in the ecosystem relative to the focal firm. We identify a key asymmetry that results from the location of challenges relative to a focal firm — greater upstream innovation challenges in components enhance the benefits that accrue to technology leaders, while greater downstream innovation challenges in complements erode these benefits. We further propose that the effectiveness of vertical integration as a strategy to manage ecosystem interdependence increases over the course of the technology life cycle. We explore these arguments in the context of the global semiconductor lithography equipment industry from its emergence in 1962 to 2005 across nine distinct technology generations. We find strong empirical support for our framework.
Ecosystem as Structure Adner, Ron
Journal of management,
01/2017, Letnik:
43, Številka:
1
Journal Article
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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.
Corporate effects in variance decomposition capture heterogeneity of business performance derived from factors internal to firms at the corporate level. Most estimates of corporate effects do not ...include effects associated with fluctuations in returns over time, except insofar as the fluctuations affect the average corporate return for the time period in question. Exclusion of the time-varying dimension of the corporate effect makes it difficult to fully understand the effect of corporate strategy and the actions of corporate managers, particularly in response to a changing environment. The evidence in this article shows that within a single industry, where managers face the same external environment, time-varying corporate effects associated with corporate level managerial decisions are statistically significant. We introduce the concept of dynamic managerial capabilities to underpin the finding of heterogeneity in managerial decisions and firm performance in the face of changing external conditions.
Why do some new technologies emerge and quickly supplant incumbent technologies while others take years or decades to take off? We explore this question by presenting a framework that considers both ...the focal competing technologies as well as the ecosystems in which they are embedded. Within our framework, each episode of technology transition is characterized by the ecosystem emergence challenge that confronts the new technology and the ecosystem extension opportunity that is available to the old technology. We identify four qualitatively distinct regimes with clear predictions for the pace of substitution. Evidence from 10 episodes of technology transitions in the semiconductor lithography equipment industry from 1972 to 2009 offers strong support for our framework. We discuss the implication of our approach for firm strategy.
The evolution of technology has been a central issue in the strategy and organizations literature. However, the focus of much of this work has been on what is essentially the "supply side" of ...technical changethe evolution of firm capabilities. We present a demand-based view of technology evolution that is focused on the interaction between technology development and the demand environment in which the technology is ultimately evaluated. We develop a formal computer simulation model that explicitly considers the influence of heterogeneity in market demandthe presence of consumers with different needs and requirementson firms' innovation choices. The model is used to examine the dynamics of product and process innovation (Utterback and Abernathy 1975). The analysis reveals that demand heterogeneity offers an alternative to supply-side explanations of the technology life cycle. Further, by considering the implications of decreasing marginal utility from performance improvements, the model highlights the role of "technologically satisfied" consumers in shaping innovation incentives, and suggests a rationale for a new stage in the technology life cycle characterized by increasing performance at a stable price. The stage has not yet been treated formally in the literature, but is widely observed, most prominently in digital and information-based technologies.
Ecosystem strategy is crucial for companies, but the focus on company centrality can hinder alignment and limit effective strategies. Apple's success in extending its mobile data device ecosystem ...contrasts with its failures to expand into new businesses. The consequences of these failures affect not only Apple but also its complementors. Successful ecosystems require alignment among leaders and followers, with leaders making the initial investment and followers benefiting from the value proposition. In unsuccessful ecosystems, there are only losers. The hierarchy of ecosystem winners includes leaders, followers, and unsuccessful followers. The case of mobile payments in the US illustrates the challenges of ecosystem leadership. Collaboration among smartphone players, banks, retailers, and mobile operators is essential, but the egosystem trap can hinder alignment and value creation. Companies should evaluate their leadership claim, foster followership, and shape the larger game. Smart followership involves choosing the right leader, shaping the rules, and leveraging their power. Avoiding the egosystem trap is crucial for both leaders and followers.
We explore how decision makers perceive and assess the level of risk in interdependent settings. In a series of five experiments, we examine how individuals set expectations for their own project ...investments when their success is contingent on the success of multiple, independent partners. We find that individuals are subjectively more confident and optimistic in an interdependent venture when its chances of success are presented as separate probabilities for each component and that this optimism is exacerbated by a greater number of critical partners, leading to (1) the inflation of project valuations, (2) the addition of excessive partners to a project, and (3) overinvestment of effort in the development of one’s own component within an interdependent venture. We examine these dynamics in settings of risky choice (with exogenously given probabilities) and in an economic coordination game (with the ambiguity of agency and strategic risk). We conduct our study with a wide range of participant samples ranging from undergraduates to senior executives. Collectively, our findings hold important implications for the ways in which individuals, organizations, and policymakers should approach and assess their innovation choices in ecosystem settings.
Product innovation often hinges on technological changes in underlying components and architectures, requiring extensive coordination between upstream component development tasks and downstream ...product development tasks. We explore how differences in the ways in which firms are organized with respect to components affect their ability to manage technological change. We consider how firms are organized in terms of both division of labor and division of knowledge. We categorize product innovations according to whether they are enabled by changes in components or by changes in architectures. We test our predictions in the context of the global dynamic random access memory industry from 1974 to 2005, during which it transitioned through 12 distinct product generations. We find that vertically integrated firms had, on average, a faster time to market for new product generations than nonintegrated firms. The performance benefit that firms derived from vertical integration was greater when the new product generation was enabled by architectural change than when it was enabled by component change. We also find that although many nonintegrated firms extended their knowledge boundaries by developing knowledge of outsourced components, the performance benefits from such knowledge mostly accrued to “fully nonintegrated” firms (i.e., those that did not vertically integrate into any upstream component), rather than “partially integrated” firms (i.e., those that vertically integrated into some components but not others). Our study makes a strong case for the value of integrating the knowledge- and governance-based theoretical perspectives to broaden our examination of how firms organize for innovation and to uncover the technological and organizational sources of performance heterogeneity.
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