Exploring the governance mechanisms for value co-creation in PSS business ecosystems

Abstract

This paper explores the governance mechanisms for value co-creation when product–service systems (PSS) providers move into PSS business ecosystems. The PSS providers in our study applied both internal and external governance mechanisms to regulate value co-creation. Internally, they relied on formal organisational setups and informal coordination between product, service and digital divisions. Externally, they had strong relational governance mechanisms supported by appropriate contractual governance mechanisms. As frontline (field) interactions became an important factor for realising value co-creation, PSS providers also attempted to develop individual-based psychological governance to complement group-based relational governance. Our findings reveal five challenges in managing the governance mechanisms: (1) orchestrating all digital resources and capabilities, especially managing the incompatibility and isolation of different digital tools in product and service divisions; (2) managing all relations in one platform that can embrace customer relationship management (CRM), supplier relationship management (SRM) and form relations with emerging actors such as authorities; (3) designing appropriate contractual governance to measure co-created value from economic, societal and environmental perspectives, and govern data ownership and security; (4) managing the interplay between contractual and relational governance mechanisms during PSS agreement implementation; and (5) developing psychological governance for frontline staff. We direct PSS providers towards essential aspects that require attention when developing governance mechanisms by identifying these challenges. Moreover, identifying such challenges will allow policymakers, practitioners, and scholars to jointly develop standards, policies and guidelines in these increasingly prevalent ecosystem business arrangements.