Becoming a keystone: How incumbents can leverage technological change to create ecosystems

Doctoral thesis, 2022

The proliferation of digital technology and automation in the 21st century has created a need to revisit established theories on value creation. Exponential advances in Internet of Things (IoT) technologies are dismantling firm- and industry-specific value creation processes. The firms developing digital technology-based products and services typically participate in broad networks, which allows them to integrate distinct systems and technologies to produce a focal value proposition. The purpose of this thesis is to explore how incumbents can leverage technological change to create an innovation ecosystem. 

The concept of an innovation ecosystem is a powerful analogy to explain value co-creation in a network. In general, ecosystems are broad cooperative networks, in which the actors coalesce organically and co-evolve through the construction of a value proposition. Although several scholars have studied value co-creation in an ecosystem, few have explored the process of ecosystem emergence. Also, extant research on ecosystem primarily investigates orchestration capabilities from the perspective of technology firms or new entrants that emerge within an ecosystem. Few empirical studies investigate how incumbent firms can co-create value and develop capabilities to orchestrate an ecosystem as a keystone actor.

In this context, this thesis investigates a manufacturing firm’s efforts to develop a new technology. The research was designed as an ethnographic in-depth case study of Volvo Car Group, an incumbent in the automotive industry. The thesis employs a qualitative abductive research approach to explore the collaborations related to the development of AD technology, a discontinuous technological change for incumbent automotive firms. Based on a four-year longitudinal case study and findings from four papers, the thesis makes important contributions to scholarly understanding of ecosystem emergence in traditional industries.

This thesis makes three main contributions to literature on innovation ecosystems: (1) it describes ‘layered modularity’ as a design mechanism that facilitates joint value creation leading to the emergence of an innovation ecosystem, (2) it shows how developing physical products (such as devices or hardware platforms) and digital systems (such as IoT technologies or software) in distinct layers allows intertwining of divergent innovation activities and
development methods, (3) it distinguishes between three distinct activities – cooperation, coordination and competition – that incumbents firms need to manage in order to become a keystone actor and orchestrate the ecosystem. The findings presented in this thesis have important implications for manufacturing firms looking to leverage a DTC to create new ecosystems.