How a Firm's Value Capture Affects Value Creation in Its Ecosystem.

Using a formal model, we develop a theory of how value capture by a firm with market or bargaining power dampens the incentives of other agents in its ecosystem, showing that the implications for value creation depend critically on the nature of the complementarities these agents generate. If complementarities are net positive, then dampening agents' incentives can dramatically reduce the value created in the ecosystem, even to zero—that is, the prospect of a firm's value capture may even prevent the firm itself from operating. Conversely, if complementarities are net negative, dampening agents' incentives can increase value creation by discouraging agents from imposing these negative complementarities on each other. The disincentivizing effects of a firm's value capture can be mitigated by enforceable contracts, cooperative governance, and self-organization by agents, but what is optimal for the agents or the firm may not be optimal for value creation in the ecosystem. [ABSTRACT FROM AUTHOR]

Copyright of Academy of Management Review is the property of Academy of Management and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)