Theorizing Digital Business Innovation: Platforms and Capabilities in Ecosystems

Abstract

This paper focuses on how information and technology drive digital business innovation in business ecosystems where multiple co-contributors work together to innovate new business models. Specifically, we develop a framework based on two novel concepts — (1) digital business innovation (DBI) platforms; and (2) digital business innovation capability at the ecosystem level of analysis. First, we describe DBI platform through three properties — scale, scope and speed. Second, we describe DBI ecosystem capability using three dimensions — operational, dynamic and improvisational capabilities. The DBI platform and capabilities together give rise to business value that are created at the level of the ecosystem and shared by the various co-contributors. We generate a set of theoretical propositions by bringing the role of information and technology as drivers of value creation and capture in ecosystems. While extant research on IT and innovation has focused on the individual, organizational, and rarely at the inter-organizational level of analysis, this paper argues for the importance of innovation ecosystems, which are complex, interdependent, and constantly evolving. We support our conceptual framework and propositions with a case example of digital business innovations with digital technologies underway in the automotive sector. We conclude with a set of critical issues for further development of theory on DBI platforms and ecosystem capabilities that are disrupting and transforming firms, industries, and markets. Our belief is that IS research could make important contributions to the broader innovation literature by explicating how information and technology — individually and in tandem — give rise to business value co-created in ecosystems and shared by the various co-contributors in the ecosystem. Accordingly, we hope this paper will entice IS research to rethink digital business innovation at the level of the ecosystem.