Surrendering control to gain advantage: Reconciling openness and the resource‐based view of the firm

Abstract

Research Summary Strategic openness—firms voluntary forfeiting of control over resources—seemingly challenges the premise of the resource‐based view (RBV), which posits that firms should control valuable, rare, and inimitable (VRI) resources. We reconcile this apparent paradox by formalizing whether and when firms—consisting of resource bundles and deriving competitive advantage from exploiting selected VRI resources—may maximize profitability by opening parts of their resource base. As such, our article refines RBV‐related thinking while supporting the theory's core tenets. Notably, we illustrate how a common‐pool resource can become a source of competitive advantage and how firms may use openness to shape inter‐firm competition. Managerial Summary Conventional wisdom holds that firms must control scarce and valuable resources to obtain competitive advantage. That being said, over the past decade, many firms—among them Computer Associates, IBM, and Nokia—embarked on open strategies and made parts of their valuable resources available for free. These decisions pose an obvious conundrum, which we solve in our article. We use a mathematical model, grounded in principles of the resource‐based view, to show why and under what conditions open strategies will succeed. Firms significantly improve their performance when (a) opening resources reduces their cost base while (b) strongly increasing demand for their still‐proprietary resource(s). We also explain how openness can reshape markets by weakening competitors, particularly in highly rivalrous environments.

Maneuvering in Poor Visibility: How Firms Play the Ecosystem Game when Uncertainty is High

“…Rather, dynamic control over the process of ecosystem emergence will draw increasingly on institutional and sociological devices (Thomas et al, 2014) that allow for influencing and monitoring. These dynamics will then steer the process toward intangible control points such as customer access, networking ability, or brand, all of which, at least conceptually, might even be amplified by waiving ownership on underlying assets (Alexy, West, Reitzig & Klapper, 2017). Indeed, in line with a growing body of conceptual work (Alexy et al, 2013;Tilson et al, 2010;Yoo et al, 2010) as well as insights from the linear ecosystems model (e.g., Gawer & Cusumano, 2002), our findings suggest that strategically sharing IP may be essential to moving the future ecosystem toward where the focal firm would want it; or to at least limit directional change (see Stieglitz, Knudsen, & Becker, 2016) to prevent drifting (see also Polidoro & Toh, 2011).…”

On open innovation, platforms, and entrepreneurship

“…For the platform owner, openness also comes with risk; thus, one of the most important decisions is what to reveal (open) and what to keep secret. In this sense, open innovation is also a theory of selective revelation (Alexy et al, ; Alexy, West, Klapper, & Reitzig, ; Henkel, ) rather than a prescription that openness is inherently “good.” It is possible that too much openness can allow competitors to “fork” the platform, which may create problems not only for the platform owner, as their intellectual property is used by a competitor (Karhu, Gustafsson, & Lyytinen, ), but also for new ventures that serve as complementors. Thus, future research should examine how the nature/type and degree of platform openness shape an entrepreneur's decisions to pursue associated opportunities, as well as the survival and performance of their ventures.…”

“…Similarly, by creating platforms and publishing APIs, platform owners enable new ventures to pursue opportunities with demonstrated business models and well-established markets. The openness of the platform architecture as well as the ecosystem governance could potentially shape the intensity and scope of the generated entrepreneurial opportunities as well as how readily they are pursued and enacted (Nambisan, 2017 (Alexy et al, 2013;Alexy, West, Klapper, & Reitzig, 2018;Henkel, 2006) rather than a prescription that openness is inherently "good." It is possible that too much openness can allow competitors to "fork"…”

Leveraging diverse knowledge sources through proactive behaviour: How companies can use inter‐organizational networks for business model innovation

“…While scholars emphasize the relevance of networks for complex innovation processes like BMI, there is still limited understanding of how knowledge sources in the network should be combined (Alexy, West, Klapper, & Reitzig, ; Calia et al, ) and, in turn, how networks should be changed over time to enhance innovation (Kang & Zaheer, ; Venkatraman & Henderson, ). In this paper, we address these issues, examining how the combination of diverse knowledge sources within networks and the propensity to change network ties influence BMI.…”