Abstract
Digital companies exhibit discontinuous growth in the process of shifting from their existing core business to a newer and less familiar business. This pattern of growth often ends in failure mainly because companies invest most of their resources in maintaining the value network of their existing core business, which ultimately results in a “lock-in” effect. The fractal theory assumes that there are similarities among fractals within companies. These similarities may reduce the threats posed by the value network lock-in effect and increase the chances of successful discontinuous growth. In this study, we applied fractal theory to consider the following questions: (1) in what aspects does the successful discontinuous growth of digital companies exhibit fractal characteristics? (2) What strategy does digital companies use to ensure these fractal characteristics? We adopted an exploratory single-case study method and chose ByteDance as the case company to analyze its successful shift from Toutiao (a media platform) to Douyin (a short-video sharing platform). Our results show that (1) a necessary condition for the successful discontinuous growth of digital companies is that similarities exist (e.g., in technology or customer base) between the existing core business and the new business and (2) entrepreneurial bricolage is a strategy used by digital companies to ensure the existence of fractal characteristics of similarities. We discuss the theoretical contributions and practical implications of this finding.
Highlights
Disruptive innovation theory states that, to adapt to a dynamic environment, companies should pay attention to growth opportunities in emerging markets and create opportunities to grow new types of business [1]
Discontinuous growth can be regarded as the successful development of fractals. e new business shares some fractal characteristics with the existing core business, which may reduce the threat posed by the value network lock-in effect in discontinuous growth [5]
This study provides a new theoretical perspective to explain the discontinuous growth of digital companies, which has important theoretical value for understanding the shift from the existing core business to the new business and has important practical implications for digital companies aiming to realize discontinuous growth in a dynamic environment
Summary
Disruptive innovation theory states that, to adapt to a dynamic environment, companies should pay attention to growth opportunities in emerging markets and create opportunities to grow new types of business [1]. This study provides a new theoretical perspective to explain the discontinuous growth of digital companies, which has important theoretical value for understanding the shift from the existing core business to the new business and has important practical implications for digital companies aiming to realize discontinuous growth in a dynamic environment. Eories of exogenous growth cannot provide a complete explanation for discontinuous growth These theories emphasize that the key to company growth relies on identifying potential growth opportunities [10], there is still an unresolved resource allocation conflict between the existing core business and the new business [13]. E problem of discontinuous growth is that the value network lock-in effect in existing core business limits the resources available to develop new businesses. Digital companies are good at resource integration [31]. ey use low-cost and reusable information resources as factors for identifying and developing new entrepreneurial opportunities and the affordance characteristic of digital technology helps such companies to realize “technology + domain” resource reorganization [32]
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