Mechanisms for Business Ecosystem Members to Capture Value through the Strong Network Effect

Abstract

Business ecosystem leaders tend to focus on their own success rather than carefully monitoring the success of business ecosystem members, and each member must find a mechanism to capture value. Rarely has business ecosystem research examined the success of business ecosystem members. This study investigates the mechanisms by which business ecosystem members capture value in the business ecosystem related to different types of storage formats and how these mechanisms contribute to the sustainability of the business ecosystem. We identify two value capture mechanisms in the storage business ecosystem. First, media manufacturers, being members of the storage business ecosystem, can capture value through strong network effect in the server backup markets. They can sell a significant amount of media for every single unit of a drive sold through the strong network effect. Second, media manufacturers can capture value by selling their media repeatedly as consumables for many years. We quantitatively confirm these mechanisms using a vector autoregressive model to measure the strength of the indirect network effect. These mechanisms help business ecosystem members in staying within the business ecosystem and also contribute to the business ecosystem’s sustainability.