‘Breaking the Mirror’ to Face Digital Convergence: The Role of Selective Mirroring in the Trade-Off between Value Creation and Capture Mechanisms

Abstract

This research questions the mirroring hypothesis in the context of digital convergence. The mirroring hypothesis suggests that the organization of innovation activities tends to mirror the technical architecture of products. When the architecture is modular, such mirroring optimizes the management of innovation activities. But it can also limit the ability of incumbent firms to adapt to technological discontinuities. Digital convergence is a source of discontinuities that transform the conditions of value creation and capture within industries. It leads to new complementarities that push incumbents to collaborate with firms coming from other industries within emerging ecosystems. How does the mirroring between product architecture and organization evolve in the face of the new challenges of value creation and capture brought by digital convergence? This question is addressed through a qualitative case study of the organization of innovation activities between Renault and its partners in the field of embedded automotive electronics. The results show that the automaker ‘breaks the mirror’ through a strategy of selective mirroring that allows it to collaborate with new complementors and to reconfigure its mechanisms of value creation and capture.