Tech play versus global play in the automotive industry - resolving goal conflicts in ecosystems with digital platforms

Type de publication:

Conference Paper

Source:

Gerpisa colloquium, Detroit (2022)

Mots-clés:

goal conflicts

Résumé:

Tech play versus global play in the automotive industry -

resolving goal conflicts in ecosystems with digital platforms

 

 

Purpose

Profit pools in the automotive industry are shifting more and more towards a tech play, i.e. moving downstream towards smart mobility solutions and upstream to networked and self-driving vehicles (brain supply, see Adner and Lieberman, 2021). At the same time, the growing automotive markets as the target of a future global play lie outside the traditional markets of North America, Europe and Japan (e.g. Ghauri, 2021). To maximize profits, traditional automotive companies therefore have to occupy space in both the technology interface and the international growth markets. To do so, however, they need to make high investments into connectivity, autonomy and sharing, in addition to electrification and the global footprint.

Because the capital markets are pushing automotive companies very strongly in the direction of asset-light strategies at the same time - technologically (e.g. Cusumano et al., 2019) and internationally (e.g. Cha, 2020) - and there is also a trend towards de-globalization (e.g. Buckley, 2020), due among other things to the increasing importance of sustainability and nationa-lism (e.g. Ghauri et al., 2021), multinational automotive companies with limited resources are now increasingly faced with goal conflicts (e.g. Uzzi, 1996, Sargent and Matthews, 2006) bet-ween essential investments and asset light strategies. It is not feasible in these conflicts to opt for one of the goals or to reach two goals in their entirety. Instead, it is proposed to balance such irresolvable conflicts and seek solutions through mediation (e.g. Gavidia 2016) or “third variables” (e.g. Arregle et al., 2013).

Up to now, conflicts relating to the strategic and international orientation were mostly resolved by steadily rising capital investment, such as the goal conflict between cost leadership and differentiation (e.g. Porter, 1985), by means of hybrid strategies (e.g. Pertusa-Ortega et al., 2009) on the basis of platforms and identical parts, which uncouple the increase in costs and value along the value chain (Proff, 2000). Internationally, the conflict between hierarchy and autonomy for foreign subsidiaries (e.g. Hoenen and Kostava, 2015) was resolved by means of investments into regional headquarters or R&D centers (e.g. Mudambi, 2011). Nowadays, with the high investments required for the tech play and the global play, this is no longer possible.

Nevertheless, it is to be expected that the use of digital platforms (e.g. Cusumano et al., 2019) across corporate boundaries can reduce the use of resources significantly in innovative networks of partners (“structural”) ecosystem (Adner 2017), both through transaction platforms (Rochet and Tirole, 2003) and through digital platforms as a venue of innovation (Cusumano et al., 2019). Ecosystems are also likely to enable asset light cross-border strategies internationally (e.g. Nambisan et al. 2019, Cha, 2020).

This article therefore examines whether digital platforms can reduce the goal conflicts

  1. Between high investments into a tech play and investments into an asset light technology development,

2. Between high investments into increasing the global footprint (in a global play) and investments into reducing the global footprint with the aim of achieving asset light internationalization and

3. Between investment into the global play and investments into the tech play.

To the best of our knowledge, these areas have not yet been explored.

Design

This article first of all puts forward reasons why digital platforms in (structural) ecosystems can resolve the goal conflict between high investments and asset light strategies, because they enable joint value creation (value co-creation) by means of multiple and improved utilization of resources and capabilities as quasi-public goods (e.g. Buchanan 1965: 2-3) on the basis of several partner companies. However, the precondition is that opportunities for “platformization” can be tapped (e.g. Nambisan et al. 2019: 1465). In addition to economies of scope through complementarity, this means in particular modularization (Jacobides et al., 2018), network effects (Katz and Shapiro, 1985), including global ones (e.g. Banaliewa, Dhanaraj, 2019), pricing in two-sided markets (Cusumano et al., 2019) and data-based learning effects, including through AI, e.g. Iansiti und Lakhani, 2020). A further precondition is that it must be possible to limit the risks (drain of skills and competences to partners, e.g. Krylova et al., 2016).

These explanations can be used as a basis for the hypotheses that digital platforms in ecosystems can improve value co-creation in ecosystems and therefore reduce the goal conflicts in the tech play, particularly by means of innovation platforms (Hypothesis 1); the goal conflicts in the global play, particularly by means of transaction platforms (Hypothesis 2); and the goal conflicts between the tech and global play by means of hybrid platforms (e.g. Cusumano et al, 2019) or a portfolio of several ecosystems (Hypothesis 3).

These hypotheses are transferred to a conceptual model with multiple study variables which are linked by multivariate correlations and statistically tested by causal analysis with latent variables (by partial least squares-structural equation modeling, PLS-SEM) (Hair et al., 2019). In order to transfer the study concept to a structural equation model, the individual constructs are mapped using lower-order constructs and captured by indicators (Sarstedt et al., 2019: 197 - 199).

 

Findings

A survey of around 150 global automotive companies (OEMs and suppliers) is currently being prepared, it will be carried out in April and analyzed in May, so that initial results will be available for the Gerpisa Conference in June.

 

Practical and theoretical implications

The study will deliver important practical findings about how multinational automotive companies are positioning themselves with regard to goal conflicts relating to tech and global plays. These findings will be supplemented by qualitative indications as to the expected changes in the mobility industry and the future role of the traditional industry (e.g. Jacobides et al., 2016; Adner and Lieberman, 2021): will the tech play be dominated by autonomous shared shuttles or individual vehicles with “autonomous driving” as an on-demand function? Will automobiles still be consumer goods which need local customer interaction in the global play, or will vehicles become commodities for which a light touch (virtually) via networks is sufficient? And will traditional automotive companies (both manufacturers and suppliers) retain an integrative function or will they become suppliers?

On the theory side, this article will offer in-depth insights into the way in which (innovation and transaction) ecosystems can resolve goal conflicts as a third variable. They therefore also provide indications about the future importance of the traditional automotive companies as a possible part of “The Global Auto Industry Value Chains, Emerging Players and the Global South“ working group.

 

References

Adner, R. (2017). Ecosystem as structure. Journal of Management, 43(1), 39-58.

Adner, R.; Lieberman, M. (2021): Disruption Through Complements. In: Strategy Science 6(1), S. 91–109.

Arregle, J.L., Miller, T.L., Hitt, M.A., Beamish, P.W. (2013): Do regions matter? An integrated institutional and semi-globalization perspective on the internationalization of MNEs. In: Strategic Management Journal, 34(8), S. 910 - 934.

Banalieva, E.R., Dhanaraj, C. (2019): Internalization theory for the digital economy. In: Journal of International Business Studies, 50(4): 1372-1387.

Buchanan, J.M. (1965): An Economic Theory of Clubs. In: Economica New Series, 32(125), S. 1-14.

Buckley, P.J. (2020): The theory and empirics of the structural reshaping of globalization. In: Journal of International Business Studies, 51(9): 1580-1582.

Cha, H. (2020): A paradigm shift in the global strategy of MNEs towards business ecosystems: A research agenda for new theory development. In: Journal of International Management, 26(3): 100755.

Cusumano, M. A.; Gawer, A., Yoffie, D. B. (2019): The Business of platforms: Strategy in the age of digital competition, innovation, and power. New York: HarperCollins Publishers.

Gavidia, J.V. (2016): Impact of parent-subsidiary conflict on ERP implementation. In: Journal of Enterprise Information Management, 29(1), S. 97-117.

Ghauri, P., Strange, R., Cooke, F.L.(2021): Research on international business: The new realities. In: International Business Review, 30(2): 101794.

Hair, J.F.; Black, W.C.; Babin, B.J.; Anderson, R.E. (2019): Multivariate data analysis. Eighth edition. Andover, Hampshire: Cengage Learning EMEA.

Hoenen, A.K., Kostova, T. (2015): Utilizing the broader agency perspective for studying headquarters subsidiary relations in multinational companies. In: Journal of International Business Studies, 46(1): 104-113.

Iansiti, M., Lakhani, K.R. (2020): Competing in an age of AI: Strategy and Leadership when algorthms and networks run the world. Bosten/Mass.: Harvard Business Review Press.

Jacobides, M.G., MacDuffie, J.P., Tae, C.J. (2016): Agency, structure, and the dominance of OEMs: Change and stability in the automotive sector. In:Strategic Managemetn Journal, 37(9): 1942-^967.

Jacobides, M.G.; Cennamo, C.; Gawer, A. (2018): Towards a theory of ecosystems. In: Strategic Management Journal, 39 (8): 2255-2276.

 

Katz, M.L., Shapiro, C., (1985): Network externalities, competition and compatibility. In: American

Economic Review, 75(3): 424-440.

 

Krylova, K. O., Vera, D., & Crossan, M. (2016). Knowledge transfer in knowledge intensive organiz

tions: the crucial role of improvisation in transferring and protecting knowledge. Journal of Knowledg Management, 20(5), 1045-1064.

 

Mudambi, R. (2011): Hierarchy, coordination, and innovation in the multinational enterprise. In:  Global Strategy Journal, 1 (3-4), S. 317-323.

 

Nambisan, S., Zarah, S.A., Luo, Y (2019): Global platforms and ecosystems: implications for international business theories. In: Journal of International Business Studies, 50(9), 1446-1486.

Pertusa-Ortega, E.M., Molina-Azorın J.F., Claver-Cortes, E (2009). Competitive Strategies and Firm Performance: A Comparative Analysis of Pure, Hybrid and ‘Stuck-in-the-middle’ Strategies in Spanish Firms. In: British Journal of Management, 20: 508–523.

Proff, H. (2000): Hybrid strategies as strategic challenge - The case of the German automotive industry. In: Omega. The International Journal of Management Science, 28(5): 541-553.

Rochet, J.-C., Tirole, J. (2003): Platform competition in two-sided markets. In: Journal of the European Economic Association, 1(4): 990-1029.

Sarstedt, M.; Hair, J.F.; Cheah, J.-H.; Becker, J.-M.; Ringle, C.M. (2019): How to specify, estimate, and validate higher-order constructs in PLS-SEM. In: Australasian Marketing Journal 27(3): 197-211.

Uzzi, B. (1996): The sources and consequences of embeddedness for economic performance of organizations: The network effect. In: American Sociological Review, 61(4), S. 674-698.

Video

      

 

  
GIS Gerpisa / gerpisa.org
4 Avenue des Sciences, 91190 Gif-sur-Yvette

Copyright© Gerpisa
Concéption Tommaso Pardi
Administration Juan Sebastian Carbonell, Lorenza MonacoGéry Deffontaines

Créé avec l'aide de Drupal, un système de gestion de contenu "opensource"