Governance Structures and Coordination Trade-offs: A Discriminating Alignment Theory of Innovation Ecosystem Architectures

The architecture of innovation ecosystems—the distribution of productive activities and the structure of exchanges that integrate outputs—varies widely, and it has major implications for how ecosystems create value and which participants capture value. Existing strategy research lacks a framework for explaining why different ecosystem architectures arise in different contexts. In this paper, I argue that ecosystem architectures can align with market contexts. I show that architectures differ in how well they handle environmental dynamism, systemic uncertainty, and demand heterogeneity. By integrating Williamson’s foundational work on hybrid governance arrangements with the game-theoretic approach to technical coordination, I uncover a coordination trade-off, between speed and scope, and an architectural trilemma in which a given architecture can provide at most two out of three adaptation attributes. The discriminating alignment framework I develop produces a map that predicts which architectures are aligned with which configurations of environmental parameters. The paper contributes to strategic management by situating ecosystems in the markets-and-hierarchies framework of institutional economics with greater granularity than prior work and by developing a novel approach for analyzing how governance structures and architectures facilitate coordination among ecosystem participants. Funding: This article draws on research supported by the Social Sciences and Humanities Research Council of Canada and the Strategy Research Foundation.