In the modern world, economic value is often created by a system of complementary products and services. For example, the value created by a smartphone (e.g., Samsung) depends on the speed of its mobile data connection (e.g., AT&T) and the availability of software—an operating system (e.g., Android) and third-party applications (e.g., Uber)—to install on it. Researchers and practitioners often refer to the set of firms producing the complementary products and services as an ecosystem. Firms in the ecosystem are linked by technological interdependencies, but they lack a hierarchical relationship in which to manage those interdependencies. Decisions about how to create value for customers are thus made in a decentralized way by independent firms.
My research addresses how managers and entrepreneurs in decentralized ecosystems make decisions about technologies and collaborators. My published and ongoing research falls into three main streams. Note: “OA” denotes a published paper is open access. “PW” denotes that published paper is behind a paywall; in all cases I also include an ungated (“UG”) link to a preprint version of the same work.
1. Temporary gatherings and technological evolution in decentralized ecosystems
A key argument I put forward across several papers is that temporary gatherings, such as conferences, trade shows, and hackathons, are a critical forum for the growth and coordination of decentralized ecosystems. Temporary gatherings entail short but intense periods of interaction between members of distinct organizations. Because they hail from different organizational contexts, people who mix at temporary gatherings bring diverse prior knowledge. This makes temporary gatherings a crucible for knowledge diffusion, idea recombination, and social bonding.
In the paper “Platform Diffusion at Temporary Gatherings: Social Coordination and Ecosystem Emergence” (Fang, Wu, and Clough, 2021, link-OA), published in Strategic Management Journal, my coauthors and I study how attendance at a software development hackathon affects the technology adoption decisions of a software developer. Incumbent technology firms that own digital platforms attempt to attract third party software developers to build products that complement their platform. These firms sponsor hackathons as a means of attracting platform joiners. We collected and analyzed a novel dataset consisting of data on 167 hackathons and on the longitudinal software development activity of 1,302 developers who attended at least one of the hackathons. We find that hackathon attendance has a dramatic impact on software developers’ adoption of platform technologies. As expected, hackathon sponsorship boosts platform adoption. More intriguingly, social interactions at the hackathons lead to the diffusion of platform adoption in a pattern consistent a bandwagon effect.
In ongoing work, my coauthors and I are continuing to study temporary gatherings to better understand how they generate innovations, enable coordination, and facilitate the emergence of cooperative norms in innovation communities.
2. Interfirm networks and technological evolution in decentralized ecosystems
Managers in decentralized ecosystems often use interfirm network ties—such as vertical buyer-supplier ties and interfirm alliances—to mitigate uncertainty and learn about their industry’s future trajectory. However, selecting network partners is challenging. When performance outcomes result from a complex technological system, allocating credit among the collaborators who contributed towards the outcome is challenging. In addition, coordination in ecosystems is hindered by firms’ attempts to capture the value created collectively by the ecosystem.
In the paper “Tie Dissolution in Market Networks: A Theory of Vicarious Performance Feedback” (Clough and Piezunka, 2020, link-OA) published in Administrative Science Quarterly, my coauthor and I address the question of how managers evaluate suppliers when the complexity of the technological system on which they collaborate makes it difficult to untangle each collaborator’s contribution to system performance. We study the relationships between Formula 1 motorsports teams and the firms that supply a critical vehicle component: the engine. With system performance defined by the championship ranks achieved in the series of Grands Prix, teasing out the contribution of the supplier is not trivial. We show that managers are more likely to dissolve a supplier tie when the supplier’s other customers exhibit performance below their respective historic track records. This article contributes to network theory by helping bolster the evolutionary perspective on network change: firm performance is an antecedent of network change, not just a consequence of a firm’s structural position in a network.
Platform firms collect data from their network of users and complementors. Artificial intelligence capabilities can translate that data into predictive insights. In a Dialogue article in Academy of Management Review (Clough and Wu, 2022, link-PW, link-UG), my coauthor and I argue that firms adopting AI technology are likely to pursue value capture for themselves at the expense of value creation for their users and third-party complementors. We explain how data-driven learning lets platform firms to exploit their users. We also emphasize that the centralized control of data means data-driven learning has different strategic implications compared with traditional direct and indirect network effects.
A solo authored project derived from my dissertation also studies tensions between value creation and value capture in an ecosystem setting. Firms in innovation ecosystems face a dilemma over when to adopt a new technology generation. Early adoption may enable a firm to pre-empt its direct competitors and gain a first-mover advantage. However, early adoption runs the risk that the firm adopts too early, before complementary components in the product system are available. In a working paper, “Do Alliance Networks Solve the Ecosystem Timing Dilemma?”, I analyze a large dataset of alliances and technology upgrades in the global mobile telecommunications industry.
3. Founders’ decisions about strategies and collaborations in new ventures
In addition to studying managerial decisions in emerging and established ecosystems, I also study founders’ decisions relating to new venture creation. My entrepreneurship research addresses how entrepreneurs mobilize resources to build new ventures, with a particular focus on founders’ decision over whether, and with whom, to form a founding team.
In the article “Turning Lead into Gold: How do Entrepreneurs Mobilize Resources to Exploit Opportunities?” (Clough, Fang, Vissa, and Wu, 2019, link-PW, link-UG), published in Academy of Management Annals, my coauthors and I integrate past literature and put forward a theoretical framework to guide research on entrepreneurial resource mobilization. “Resources,” here, refers to human capital (e.g., founding team members), social capital (e.g., key relationships), financial capital (e.g., loans or equity investments), and other assets that help an entrepreneur execute their plan. We contribute a process model that decomposes resource mobilization into three jointly necessary steps: search, by an entrepreneur, for sources of resources; access to those resources being granted by a resource holder; and agreement on terms for the transfer of resources. We highlighted five significant research gaps, which subsequent literature has already begun to fill.
In joint work with Professor Bala Vissa, we developed a conceptual essay, “How Do Founding Teams Form? Towards a Behavioral Theory of Founding Team Formation,” which was recently published in Research in the Sociology of Organizations (Clough and Vissa, 2022, link-PW, link-UG). We characterize cofounder selection as a process of boundedly-rational search within a social network. In this book chapter, we begin to incorporate agency into models of aspiration-driven decision making.