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Complementarity, Relation-Specific Investment, and Opportunism: Explaining Asymmetric Governance Modes in Hub-and-Spoke Networks within the Enterprise Application Software Industry

Thomas Kude
University of Mannheim, Germany
Jens Dibbern
University of Mannheim, Germany
Armin Heinzl
University of Mannheim, Germany


Abstract
In the enterprise application software industry, dominant system vendors (hubs) have formed strategic partnerships with small software companies (spokes), resulting in the emergence of hub-and-spoke networks. Based upon the concept of software stacks, we argue that the governance mechanisms applied by hub and spokes depend on the complementarity between hub's and spoke's resources. Specifically, we draw on the relational view and combine it with the resource dependence theory to develop a theoretical framework that explains the link between the type of complementarity and differential governance mechanisms. We are able to show that while hubs seek to take advantage of complementarities with the entire network of partners, spokes are primarily interested in gaining access to complementary resources and capabilities of the hub organization. In order to leverage the benefits of resource complementarity, hubs mainly invest in network-specific resources to generate value. On the contrary, the spokes' investments are hub-specific. Accordingly, hubs only face minor threats of opportunistic behavior on the part of a specific spoke, whereas the spokes' existence is endangered by the threat of opportunistic behavior by the hub. Due to these three asymmetries, hubs apply formal governance mechanisms in order to efficiently coordinate the network of spokes, whereas spokes rely on informal governance mechanisms.

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Reference:Kude, T., Jens, D., Armin, H. (2008). "Complementarity, Relation-Specific Investment, and Opportunism: Explaining Asymmetric Governance Modes in Hub-and-Spoke Networks within the Enterprise Application Software Industry," Proceedings > Proceedings of JAIS Theory Development Workshop . Sprouts: Working Papers on Information Systems, 8(25). http://sprouts.aisnet.org/8-25
Keywords:Relational View, Resource Dependence Theory, Power Imbalance, Modularity, Service-Oriented Architecture, Software Stack
Item Type:Article - Volume 8 Article 25 (2008)
Language:English
Email: Thomas Kude (kude@uni-mannheim.de)
Jens Dibbern (dibbern@uni-mannheim.de)
Armin Heinzl (heinzl@uni-mannheim.de)

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