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Risk management in a business ecosystem

Written by Alexander Bergström, Anton Karlson

Paper category

Master Thesis


Business Administration>Management




Master Thesis: Business ecosystems and roles The literature on BE in general and BE roles is relatively new. Today, about 25 years after Moore (1993) first proposed the concept of BE, the literature still provides several definitions of different roles in BE. Although there are several different definitions, most of the definitions are based on BEactor activities (Dedehayir, Mäkinen, and Ortt, 2016). Järvi and Kortelainen (2017) mentioned that the diversity of role definitions can be partially explained by different views on the nature of BE. For example, some researchers tend to focus on the core of BE (Moore, 1993; Iansiti & Levien, 2004; Li, 2009; Tee & Gawer, 2009; Gawer & Cusumano, 2014), while others use a wider range of methods, including Customer and regulatory functions (Dedehayir, Mäkinen & Ortt, 2016). Another explanation for diversity is the diversity of the different BEs studied. Some BEs, such as those around Airbnb or Uber, do not involve as many individual participants as others around large technological solutions. However, what all the different definitions have in common is the concept that a leader is accompanied by one or several types of followers (Adner, 2017). Followers are usually divided into two groups of actors, value creators and value supporting roles. The following sections describe the literature on the roles in BE, which are generally divided into three categories: the role of leader, the role of value creator, and the role of value support. Leadership role Leadership is the most differentiated role, although it has various concepts throughout the BE literature. What this role has in common is that the leading company constitutes the image associated with BE, and to some extent is the center of BE. Kapoor and Agarwal (2017) claimed that BE is composed of a company that coordinates the functions and infrastructure of BE by providing a platform and participating in the formulation of rules for other supplements (followers). Iansiti and Levien (2004) called BE leaders the cornerstone, aiming to improve the overall health of BE by providing a set of stable and predictable common assets. The concept of cornerstones is similar to the hub landlords described by Rong, Shi, and Yu (2013), but in the early stages of BE because they can transform and adapt to other roles. Giudici, Reinmoeller, and Ravasi (2018) further developed the conceptual cornerstone by theorizing two different BE orchestration methods implemented by the cornerstone to ensure the creation of value for other BE members. According to the author, BEOrchestration can be implemented as a closed system or an open system. In a closed system, the behavior of the coordinator is to create a centralized coordination work within the system, while in an open system, the coordinator acts as a facilitator of decentralized efforts and provides necessary resources for followers. 2.3. Risk management in the business ecosystem The BE literature needs to further identify interaction and participation risks, and develop effective strategies to monitor and mitigate these risks. Although the risk management literature has developed in the past few decades, the concept of risk management in BE is still relatively new and immature. (Smith, 2013) Generally speaking, risk management is a continuous process of dealing with the possibility and impact of loss (Mitchell, 1995). Risk management is usually described as a logical continuous process, divided into three steps: risk identification, selection of appropriate risk response strategies and monitoring results (Dorfman, 1998). This article will mainly focus on the intermediate steps to select appropriate risk response strategies for specific risks. In the field of risk management, the previous literature has identified four main risk response strategies: risk reduction, risk sharing/transfer, risk aversion, and risk retention (Dorfman, 1998; Rejda, 2005). Although this document has not been introduced in the BE environment, some previous documents do mention activities that may be applicable from a risk management perspective. The risk response strategy is described in more detail below. Risk reduction includes activities that reduce the probability of a specific event or affect the severity (Dorfman, 1998). Looking at the current BE risks found so far, they are often related to the relationship between participants. Therefore, risk reduction in the context of BE can include active activities to ensure the status of individual participants in BE. Taking actions without understanding the impact of these actions may have negative effects on the actors (Pierce, 2008). Therefore, it is logical to take activities that reduce the possibility or impact of certain risks, such as establishing strong partnerships and building trust in other BE participants. Risk sharing/transfer includes the activity of transferring the risk in whole or in part to another stakeholder, such as a customer, a partner, or an insurance company (Dorfman, 1998). A common consideration of BE participants is whether to take an active or passive role within the BE, where an active role usually means a higher risk exposure (Iansiti & Levien, 2004). The previous literature mentioned that the ability to dynamically adapt to the company's different participation models (relationship types) has become important (Bosch-Sijtsema & Bosch 2015). This indicates that the possible risk sharing/transfer response may be to accept passive roles and allow other participants to engage in some risk-related activities, such as manufacturing, assembling products, or contacting customers. Read Less