Open value creation and business model innovation : managing openness for sustainable competitive advantage

Over the past decade, with the rise of digitization, the linkage of the concepts of “openness strategies” in value creation and “business model innovation” (BMI) has received increasing attention. Openness strategies, in this context, refers to a firm’s boundary choices in value creation and defines strategic collaborations with external actors from its business network. The most recent and well-known examples are digital and data-driven platform businesses that rely on independent external partners to fulfill their core business activities. But there are also many other examples of firms that maintain classical relationships with external actors through alliances, joint ventures, or supply chain collaboration. These openness strategies are often seen in the automotive industry with its technology alliances between competitors to drive electric vehicles’ development or gain efficiency by integrating suppliers and lean production approaches such as the Toyota production system. Other examples of openness strategies include open innovation approaches through collaboration with innovation intermediaries in research and development (R&D) or partnerships in the areas of customer services and IT. These openness strategies intend to increase the innovativeness or operational performance of enterprise value creation. Against this background, the business model (BM) construct serves as a means to explain value creation and its commercial exploitation of innovation through a customer-centric value proposition with its products and/or services. The BM defines firm resources, activities, and interactions with actors from the business environment that span firm boundaries. And, especially for researchers, the contemporary understanding of the BM builds on established concepts such as the resource-based theory and accounts for differences in firms’ competitive advantage. Today, the boundary-spanning business model is seen as an especially appropriate unit of analysis because it yields a broader and more granular perspective of value creation than one can get by focusing on a single firm strategy in isolation, as scholars of strategy have typically done in the past. While the theoretical foundations of the BM concept have been growing over the past decade, there is still little empirically validated research about the relationship between, on the one hand, openness strategies in value creation and, on the other hand, BMI as firms undergo ongoing processes of innovation and renewal of their BMs. This dissertation grounds its research in the BM literature and links its concepts to traditional theories of organizational and strategic management such as institutional theory and the resource-based view (RBV). My dissertation aims to shed light on the research question of how established firms can innovate their BMs to create and maintain competitive advantage in collaboration with external actors. The four research essays of my dissertation empirically study different aspects of firm competitiveness related to openness strategies in value creation, BM designs, and the underlying innovation process by employing a set of qualitative and quantitative methods. In Research Essay 1, it is hypothesized that the competitive advantage of open value creation (OVC) is contingent on the choice of a BM design (whether it is one that focuses on novelty or on efficiency as specific underlying patterns of resource utilization) and the particular governance mechanism of relational trust in external partners. Based on a cross-sectional survey, this study presents quantitative evidence for the superiority of efficiency-centric BM designs in OVC settings. It extends the RBV’s understanding of strategic openness and complements the literature on beneficial choices regarding openness, BM designs, and the degree of relational trust. The essay contributes to theory and practice by describing and explaining different configuration effects that support strategic decision-making about openness strategies and BM designs to increase a focal firm’s competitive advantage. In Research Essay 2, using knowledge-based theory and creativity literature, I investigate the collaboration mechanisms of depth, breadth, and freedom that influence the degree of business model innovation (BMI). The essay findings show quantitative evidence based on survey research that the depth of collaboration significantly affects BMI. The breadth of collaboration by itself has no significant effect, whereas the significant interaction between breadth and freedom of collaboration is positively influencing the degree of BMI. This study adds to the BMI literature by integrating creativity and knowledge-based concepts of collaboration as important perspectives for studying the innovation of established BMs. From a practical perspective, for managers, the research findings imply two advantageous governance mechanisms for open BMI in ecosystems: (1) depth of collaboration for close knowledge exchange, and (2) a combination of breadth and freedom of collaboration to benefit from broad knowledge exchanges in open business networks. In Research Essay 3, we use a mixed-method approach based on the outcome-driven innovation (ODI) method to investigate consumer needs in an effort to develop circular economy (CE)-based product-service systems (PSS) for sustainable BMI. Based on the job-to-be-done theory, ODI aims to detect and evaluate innovation potentials at the fuzzy front end of innovation that supports the development of new value propositions for circular BMs. In our case study in the consumer electronics industry, we show how insights into consumer needs along the lifecycle of a television set (TV) can be derived and effectively utilized by using the ODI method. These insights about qualitatively identified, quantitatively evaluated consumer needs are compiled by a focal firm and become BMI opportunities as it seeks to develop a PSS for TVs. The ODI results provide a foundation for customer-centric value proposition design by integrating external need information of customers to foster BM development and implementation based on the CE. Our study advances the understanding of consumer need-orientation in CE literature and yields managerial contributions to the methodological repertoire for customer-centric innovation of products, services, and BM designs in the CE practice. In Research Essay 4, we conduct a longitudinal case study of a single manufacturing company on a journey of digital transformation. From the case study, we identify latent logic conflicts resulting from the clash of two different BM logics of value offering, creation, and capture: the institutionalized logic of the dominant, established BM and that of the new one. We show that institutional logic conflicts become especially visible when actors cannot effectively reduce uncertainty about the new BM. These logic conflicts inhibit the change of the dominant BM to the new one. Managerial sensemaking about the latent logic conflicts within the BMI process reveals the need to change the firm’s decision-making logic from one based on managerial causation to one based on intrapreneurial effectuation. This study’s findings contribute to BM and entrepreneurship literature as well as the institutional theory while highlighting the concept of institutional intrapreneurship for BMI. Managerial implications include the need to separate the new BM from the existing one under a decision-making logic of effectuation to successfully realize BMI