Technology Systems and Strategy

external page Aguiar, L., Waldfogel, J., & Zeijen, A. (2024) Platform Power Struggle: Spotify and the Major Record Labels

Digitization has facilitated the emergence of large distribution platforms downstream from traditionally powerful suppliers. Digital platforms can carry many suppliers’ products, test the products’ consumer appeal, and choose which products to promote, potentially shifting power from the suppliers to the platforms. We study these forces in the recorded music industry, which was traditionally dominated by a few “major” record labels distributing their products through fragmented radio stations and retailers. Now, the majors receive most of their promotion and distribution through platforms like Spotify, which carry millions of songs from both major and “independent” suppliers. We study Spotify’s use of playlists using data covering 2017-2020. First, Spotify used their expanded playlist capacity to test – and discover – proportionately more independent songs to promote on their playlists. Second, at least relative to major-label playlists, Spotify-operated playlists promoted new independent songs more than was indicated by their subsequent success. Third, placement on Spotify new-music playlists has a large causal impact on streams. The independent-label share of new-music promotion rose from 38 percent in late 2017 to 55 percent in early 2020, which helps to explain the reported decline in the share of Spotify royalty payments to major-label suppliers over the same period.

external page Zeijen, A., Marengo, L., & Brusoni, S. (2023) Search and Performance in Ecosystems: The Changing Role of Product Architectures. LEM Working Paper Series 2023/16

A crucial assumption in organization theory is that product architectures form a stable basis on which firms make strategic choices, over a period of time. However, emerging digital technologies challenge this idea, by allowing firms to redesign architectures at will. In this paper, we explore this novel phenomenon, its effects, and its theoretical implications. We develop an NK model suitable for studying (i) variable interdependence structures between components and (ii) the dynamics of search and adaptation in ecosystems. We find that the possibility to redesign product architectures undercuts the stability on which vertical relationships are based. We distinguish two pathways through which firms can benefit from redesigning product architectures: by enhancing the fitness landscape (landscape redesigns) or by altering the conditions on which inter-firm coordination is based (ecosystem redesigns). The availability of these two pathways depends on a firm’s positioning (vertical scope and location in the value chain). Our results shed light on the changing role of interdependence structures in ecosystems, the differential advantages of integration and specialization strategies, and the effects of digital technologies in both technical and organizational domains.  

external page Arrieta, J. P., Fontana, R., & Brusoni, S. (2023). On the strategic use of product modularity for market entry. Industrial and Corporate Change, 32(1), 155-180.

We model the conditions under which firms should enter the market with modular products that support multiple standards instead of an integral product that supports a single standard. Product modularity enables firms to broaden their portfolios and increase their chances of investing in the “right” technologies early in a technology cycle. Entry with integral products instead occurs later in the cycle. We test the model’s predictions on a sample of the Local Area Network industry entrants during the 1990s.

external page Schulze, A., & Brusoni, S. (2022). How dynamic capabilities change ordinary capabilities: Reconnecting attention control and problem‐solving. Strategic Management Journal, 43(12), 2447-2477.

Building on the attention-based view of the firm, we elaborate the concept of dynamic capabilities and identify two constitutive elements: attention control and problem-solving. We show empirically that the control element of dynamic capabilities regulates how organizations (dis-)engage attention on operational versus change-oriented tasks. On this basis, we develop a process model of how control and problem-solving interact to reconfigure resources and thus modify ordinary capabilities. We study the adoption of lean management in the R&D unit of a large U.S. corporation. Our longitudinal case study identifies obstacles that organizations have to overcome to establish effective dynamic capabilities that enable their adaptation to changing environmental circumstances.

external page Michael G. Jacobides , Stefano Brusoni , Francois Candelon (2021) The Evolutionary Dynamics of the Artificial Intelligence Ecosystem. Strategy Science 6(4):412-435.

We analyze the sectoral and national systems of firms and institutions that collectively engage in artificial intelligence (AI). Moving beyond the analysis of AI as a general-purpose technology or its particular areas of application, we draw on the evolutionary analysis of sectoral systems and ask, “Who does what?” in AI. We provide a granular view of the complex interdependency patterns that connect developers, manufacturers, and users of AI. We distinguish between AI enablement, AI production, and AI consumption and analyze the emerging patterns of cospecialization between firms and communities. We find that AI provision is characterized by the dominance of a small number of Big Tech firms, whose downstream use of AI (e.g., search, payments, social media) has underpinned much of the recent progress in AI and who also provide the necessary upstream computing power provision (Cloud and Edge). These firms dominate top academic institutions in AI research, further strengthening their position. We find that AI is adopted by and benefits the small percentage of firms that can both digitize and access high-quality data. We consider how the AI sector has evolved differently in the three key geographies—China, the United States, and the European Union—and note that a handful of firms are building global AI ecosystems. Our contribution is to showcase the evolution of evolutionary thinking with AI as a case study: we show the shift from national/sectoral systems to triple-helix/innovation ecosystems and digital platforms. We conclude with the implications of such a broad evolutionary account for theory and practice.

external page Masucci, M., Brusoni, S., & Cennamo, C. (2020). Removing Bottlenecks in Business Ecosystems: The Strategic Role of Outbound Open Innovation. Research Policy, 49 (1), 103823.

This paper investigates how firms can orchestrate outbound open innovation strategically to accelerate technological progress among the firms they collaborate with, thus removing technological bottlenecks in their business ecosystem. We examine how a major oil and gas producer fostered, through its internal corporate venture unit, the development of new technologies aimed at enhancing the effectiveness of the oilfield services offered by its key providers. The comparative analysis of five innovative projects suggests that two factors were critical for the successful deployment of the proposed technologies: their potential to broaden service providers’ portfolios and the possibility to retain control over the relevant intellectual property. The concurrent presence of these two factors incentivized service providers to deploy the new technologies, aligning their interests with those of the oil major company. By revealing unexplored aspects of the interplay of inter-firm collaborations and open innovation processes, this paper extends our understanding of how firms can align the incentives and activities of other actors in their business ecosystems by strategizing their open innovation initiatives.

external page Tuna, S., Brusoni, S., & Schulze, A. (2019). Architectural knowledge generation: evidence from a field study. Industrial and Corporate Change, 28(5), 977-1009.

This article studies how a world-leading technology-intensive firm organized to renew its architectural knowledge (AK) to escape the mirroring trap. On the strength of a longitudinal, in-depth, qualitative study, we develop a process model that identifies the phases, learning modes, and core design decisions that led to new AK. The analysis of our case highlights that the development of architectural and component knowledge could not be perfectly separated. Further, we infer that the renewal of AK can be attained through partial mirroring and by dissolving extant technical and organizational boundaries. Finally, we show how resource constraints affect the extent of AK generation.

external page Cirillo, B., Brusoni, S., & Valentini, G. (2014). The Rejuvenation of Inventors through Corporate Spinouts. Organization Science, 25 (6), 1764-​1784.

This article focuses on corporate spinouts as a strategy that can rejuvenate the inventive efforts of inventors with a long tenure in the same company. We rely on an unbalanced panel of 5,604 inventor-year observations to study a matched sample of 431 inventors employed by the Xerox Corporation and find evidence in support of three predictions. First, inventors who join a spinout increase the extent of exploration in their inventive activities. Second, they decrease the extent to which they rely on the parent organization’s knowledge. Third, because long-tenured employees, through socialization, tend to progressively adopt more exploitative behavior than short-tenured members, they benefit relatively more from the spinout experience. These results are robust to several econometric specifications that try to account for the endogeneity of the inventors’ decision to join the spinout, for the fact that spinouts’ inventive activity may be intrinsically different from that of the parent company, and for the possible presence of novel external stimuli for those who join spinouts. The data provide large-sample evidence consistent with the idea that socialization reduces opportunities for organizational learning; we discuss the implications for theory and practice.

external page Jacobides, M., Brusoni, S., & Prencipe, A. (2009). Strategic Dynamics in Industry Architectures and the Challenges of Knowledge Integration. European Management Review, 6 (4), 209-​216

external page Brusoni, S., Prencipe, A., & Pavitt, K. (2001). Knowledge Specialization, Organizational Coupling, and the Boundaries of the Firm: Why do Firms Know More Than they Make? Administrative Science Quarterly, 46 (4), 597-​621.

This paper uses an analysis of developments in aircraft engine control systems to explore the implications of specialization in knowledge production for the organization and the boundaries of the firm. We argue that the definition of boundaries of the firm in terms of the activities performed in house does not take into account that decisions to outsource production and other functions are different from decisions to outsource technological knowledge. We show that multitechnology firms need to have knowledge in excess of what they need for what they make, to cope with imbalances caused by uneven rates of development in the technologies on which they rely and with unpredictable product-level interdependencies. By knowing more, multitechnology firms can coordinate loosely coupled networks of suppliers of equipment, components, and specialized knowledge and maintain a capability for systems integration. Networks enable them to benefit from the advantages of both integration and specialization. Examples from other industries extend to other contexts the model we develop.