Customer Complementarity in the Digital space: Exploring Amazon's Business Model Diversification

In spite of the striking evidence that many firms run multiple business models, scholars and practitioners still lack a comprehensive understanding about business model portfolio dynamics, particularly when this happens in the digital space. Prior research on business model diversification tends to focus on supply-side complementarities, such as a firm’s synergies among resources and capabilities. Yet, the demand-side with its customer complementarities remains theoretically and empirically unexplored, despite offering interesting opportunities for firms’ competitive advantage. By developing a qualitative, longitudinal (1995 – 2018) analysis of the various business models employed by Amazon.com, we identify and map how customer complementarities—network effects and one-stop shop effects—can support firm growth and competitive advantage, particularly in the digital space. We identify what we term the ‘integrative business model,’ defined as the business model in a portfolio exhibiting the most (and predominantly positive) customer complementarities with other business models. We propose mechanisms for the integrative business model to contribute to sustainable competitive advantage via a causal loop diagram and discuss implications for theory and practice.