Value-creating networks: an analysis of the software component business

Abstract

<div lang="en" class="abs"><p class="abs_header">Abstract</p><p>Theoretical discussion concerning value creation has been popular in recent years in business studies, at both relationship and network levels. However, the body of research on value creation still clearly exhibits a dearth of empirical studies, especially at the level of networks. In this study, value-creating networks are empirically explored in a specific dynamic industrial setting, the software component business. The purpose of the research is to build an empirically grounded model that provides the elements that are involved in carrying out value creation processes related to software component business networks. Through the empirically grounded elements of the model and variations identified within them, a typology of value-creating networks related to the software component business is aimed to be provided as an empirical outcome of the study. </p><p>First, a preliminary model of value-creating networks is built based on theoretical elaboration on the value creation and business network literature. The model is built upon the three interrelated elements of perceived end customer value, core competencies, and relationships. The preliminary model is then applied to the selected industrial setting. Based on the empirical findings, a fourth element is added at the heart of the model, namely the value system router. This fourth element characterise the importance of understanding the role of so-called system architecture in studying value creation and network structures in the software component business. </p><p>System architecture provides the layered framework for integrating different components and subparts in order to build an effective total system solution for the end customer. System architecture acts as a value system router, as it gathers value streams from several suppliers at different system layers and then leads the value stream through the integration process to the end customer, which sees the system solution provided as being one value-creating entity. Although system architecture is not a new concept or area of consideration in the fields of technology and industrial management, its role both as a rationale for the specific value network structure and as a tool for understanding actor positioning, competence linking, and supplier portfolio management has not been taken into account in earlier studies.</p></div>