Ecosystem development as a strategy for defensive nonmarket shaping

Abstract

We contribute to the literature on defensive market shaping, nonmarket strategy, and ecosystem orchestration, by exploring the case of an incumbent multinational corporation in the building industry that has successfully influenced regulations to safeguard its market position. We show that business ecosystems can be developed as a result of lead firms' nonmarket concerns rather than by immediate market objectives, something which has not previously been documented. We inductively develop a series of propositions to illustrate how lead firms govern such ecosystems, what motivates ecosystem membership, how value is created and appropriated in the ecosystem, and what perceived challenges are faced by members. We show that the scale and diversity of ecosystem actors empower firms to successfully lobby policymakers and influence industry standards. We also find that while open standards are associated with higher dissemination and market-oriented value creation in the ecosystem, they make value appropriation more difficult for individual members. Furthermore, greater diversity leads to greater differentiation of goals and activities within the ecosystem. Perceived ecosystem value therefore also depends on efficient integration and the provision of shared resources and the salience of nonmarket issues. This creates a need for efficient ecosystem governance and orchestration, but a democratized central ecosystem governance may lead to bottlenecks and slower decision-making.