Abstract
Abstract How do firms create and capture value in large technical systems? In this paper, I argue that the points of both value creation and value capture are the system’s bottlenecks. Bottlenecks arise first as important technical problems to be solved. Once the problem is solved, Then the solution in combination with organizational boundaries and property rights can be used to capture a stream of rents. The tools a firm can use to manage bottlenecks are, first, an understanding first of the technical architecture of the system; and, second, an understanding of the industry architecture in which the technical system is embedded. Although these tools involve disparate bodies of knowledge, they must be used in tandem to achieve maximum effect. Dynamic architectural capabilities provide managers with the ability to see a complex technical system in an abstract way and change the system’s structure to manage bottlenecks and modules in conjunction with the firm’s organizational boundaries and property rights.
Highlights
Large technical systems made up of many interacting components are becoming more common every day
Digital technology provides a common substrate for design, communication, and control
How do firms create and capture value in the increasingly large technical systems emerging today? In this paper, I argue that the points of both value creation and value capture are the system’s bottlenecks
Summary
Large technical systems made up of many interacting components are becoming more common every day. Digital information technology has made it possible to create ever larger technical systems with faster flows of material and information. Digital technology provides a common substrate for design, communication, and control. Spurred by the commonality of bits, a multitude of previously separate and small technical systems are expanding and converging towards one big system. How do firms create and capture value in the increasingly large technical systems emerging today? I argue that the points of both value creation and value capture are the system’s bottlenecks. Bottlenecks arise first as important technical problems to be solved. Once the problem is solved, the solution in combination with organization boundaries and property rights can be used to capture a stream of rents
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.