Managing the Value Appropriation Dilemma in Business Model Innovation

Abstract

Managers and designers of innovative business models that are enabled by emerging technologies need to build legitimacy with ecosystem participants. Yet increasing legitimacy within the ecosystem raises competitors’ incentives to imitate the business model innovators, thereby adversely affecting the innovators’ ability to appropriate value. We refer to this trade-off as the appropriation dilemma. We draw on institutional and resource-based perspectives to develop propositions about mitigating the appropriation dilemma and provide illustrations with a range of cases. Our theory development contributes to the technology management and business model innovation literatures by delineating how business model innovators can create value for all stakeholders and at the same time appropriate value through strategic business model design, a task that is particularly salient in the context of emerging technologies. We also strengthen the theoretical foundations of business model innovation research by grounding propositions about the strategic design of business models in resource-based theory and institutional theory.