Embracing the Paradox of Interorganizational Value Co‐creation–Value Capture: A Literature Review towards Paradox Resolution

• Author: Eva Niesten,Ioana Stefan
• Published date: 01 April 2019
• DOI: http://doi.org/10.1111/ijmr.12196
• Date: 01 April 2019

International Journal of Management Reviews, Vol. 21, 231–255 (2019)

DOI: 10.1111/ijmr.12196

Embracing the Paradox of

Interorganizational Value

Co-creation–Value Capture: A Literature

Review towards Paradox Resolution

Eva Niesten and Ioana Stefan1,2

Alliance Manchester Business School, University of Manchester, Manchester, M13 9SS, UK, 1Department of

Industrial Development, IT and Land Management, Faculty of Engineering and SustainableDevelopment, University

of G¨

avle, G¨

avle, 801 76, Sweden, and 2Department of Industrial Economics and Management, School of Industrial

Engineering and Management, KTH Royal Institute of Technology, Stockholm, 114 28, Sweden

Corresponding author emails: eva.niesten@manchester.ac.uk; ioana.stefan@hig.se

This study reviews literature on paradoxical tensions between value co-creation and

capture in interorganizational relationships (IORs). The purpose of this review is to

make a re-evaluation of the literature by engaging a paradox theory lens, thereby

identifying factors that render tensions salient and factors that lead to virtuous or

vicious cycles. This review of 143 articles reveals factors that make tensions salient:

these relate to plurality (e.g. coopetition), scarcity (e.g. lack of experience with IORs),

change (e.g. changes in collaboration scope) or combinations thereof(e .g. IORs in weak

appropriability regimes). Results also uncover factors that resolve paradoxical tensions

of value co-creation and capture, thus spurring virtuous cycles (e.g. carefully mixing

trust and contracts), as well as factorsthat promote vicious cycles, owing to the emphasis

on either value co-creation or capture (e.g. myopia of learning). This review further

reveals a new category of factors that may stimulate either virtuous or vicious cycles,

depending on the extent to which they are enforced. This finding expands the value co-

creation–capture paradox resolution and brings to light new dynamics in the paradox

framework of dynamic equilibrium. This studythus contributes by: (1) reassessing the

existing literature and applying paradox theory to the well-known hazard of value co-

creation and capture; (2) highlighting factors that amplify paradoxicaltensions related

to this hazard; and (3) outlining factors that help solve the paradox by embracing its

contradictory poles and factors that hinder paradox resolution by emphasizing either

value co-creation or appropriation.

The authors are listed in alphabetical order and contributed

equally to this paper. We wish to thank Albert Jolink,

Lars Bengtsson, Rodrigo Lozano, Angela Carpenter and

the anonymous reviewers for their constructive comments

and useful suggestions on earlier versions of this paper.

We are also grateful for helpful comments from Michelle

Rogan and attendees at a session on Networks during the

Academy of Management Annual Meeting in Chicago, Illi-

nois, 10–14 August 2018. Ioana Stefan gratefully acknowl-

edges funding support from University of G¨

avle (G¨

avleborg

Region and the Swedish Agency for Economic and Regional

Growth)and from KTH Royal Institute of Technology(Styffe

foundation).

Introduction

Scholars have signalled inherent tensions between

creating and capturing value in interorganizational

settings (Chowdhury et al. 2016; Lavie 2006, 2007;

Ritala and Hurmelinna-Laukkanen 2009). Such ten-

sions may take nuanced shapes, which are contingent

upon the primary source that generates them and the

settings in which they occur. One possible source of

tensions is represented by the somewhatcontradictory

mechanisms or strategies that are required to co-

create and capture value, respectively. Specifically,

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232 E. Niesten and I. Stefan

joint value creation calls for knowledge-sharing

mechanisms (see e.g. Khalid and Larimo 2012), while

capturing value demands, for instance, appropriation

mechanisms (see e.g. Veeret al. 2016). Furthermore,

value co-creation occurs at an interorganizational

level, yet value appropriation is done to benefit the

organizational level (Capaldo and Petruzzelli 2011);

the distinct levels may provide an additional onset of

conflicts. Another potential source for tensions is the

need to distribute limited resources between value co-

creation and capture (Capaldo and Petruzzelli 2011;

Mizik and Jacobson 2003), as the two require a simul-

taneous balance. Valueappropriation is aimed mainly

at dividing the resources that are shared between part-

ner organizations, yet tensions also relate to the risk

that even non-shared resources might be the source of

partners’ benefits (see Lavie 2006). These nuances of

the value co-creation–capture tensions are not to be

regarded as mutuallyexclusive or exhaustive; depend-

ing on the context, they may overlap, and differentiat-

ing between them could be difficult. This adds a layer

of complexity to both analysing and resolving such

tensions.

Laursen and Salter (2014) indicate that tensions

between co-creating and capturing value are deep-

rooted in Kenneth Arrow’s (1962) paradox of disclo-

sure. In Arrow’s (1962, p. 615) ‘fundamental para-

dox’, a ‘seller’ needs to reveal information about an

invention in order to commercialize it, while the po-

tential ‘buyer’ requires information about said inven-

tion in order to evaluate it (Arrow 1962). If the seller

reveals too much information, there is the risk that

the potential buyer would have acquired the inven-

tion for free; if the seller does not provide enough

information, there is a high chance that the buyer

would not be willing to purchase the idea, and hence

fail to capture any benefits from it. Laursen and Salter

(2014) suggest that, in modern contexts of growing in-

terorganizational collaboration, the tensions embed-

ded in Arrow’s (1962) paradox of disclosure surpass

the mere settings of arm’s-length transaction (as de-

scribed originally) and become evenmore intricate, as

organizations need to both co-create and capture value

in order to maintain competitive advantage. Based on

the above, we argue that value co-creation and value

capture (appropriation) are the two contradictory yet

interrelated poles of this paradox, following the defi-

nition of paradox proposed by paradox theory schol-

ars (see Schad et al. 2016; Smith and Lewis 2011).

Given the contradictory yet interrelated nature of

value co-creation and value capture, these two poles

need be balanced simultaneously in order to alleviate

tensions and avoid negative outcomes. For instance,

according to Smith and Lewis (2011), overemphasiz-

ing one of the paradox poles would lead to so-called

vicious cycles, which, in the present case, would lead

to failure in either co-creating or capturing value.

However, the two poles are both indispensable for

maintaining competitive advantage. It is therefore

crucial to manage tensions between value co-creation

and value capture in an effective manner, and thus to

spur virtuous cycles as described in paradox theory

(Smith and Lewis 2011).

Solutions for how to effectively manage tensions

betweenco-creating and capturing value are dispersed

in extant literature and jointly lack a holistic perspec-

tive. Moreover, what causes the value co-creation–

capture tensions in the first place is also an issue that is

not fully understood. The literature on interorganiza-

tional relations (IORs) includes several reviewstudies

that tackle the topic of tensions in IORs (e.g. Kivle-

niece and Quelin 2012; Wangand Rajagopalan 2015).

Although highly valuable, these studies have sev-

eral limitations, i.e. overlooking what influences ten-

sions between value co-creation and capture (Wang

and Rajagopalan 2015), or disregarding factors that

complicate tension resolution (Baughn et al. 1997),

or restricting the analysis to specific types of IORs,

e.g. public–privateties (Kivleniece and Quelin 2012).

The above illustrate the absence of a comprehen-

sive framework of factors that amplify various types

of tensions between value co-creation and value

capture. Moreover, although tensions between value

co-creation and capture are often dubbed paradox-

ical (Arrow 1962; Laursen and Salter 2014; Ox-

ley 1997; Ritala and Hurmelinna-Laukkanen 2013),

there are to date no synthesis studies that investigate

the tensions through a paradox theory lens. How-

ever, Poole and Van de Ven (1989, p. 563), for in-

stance, highlight the value of paradoxfor ‘understand-

ing how to work with theoretical contradictions and

oppositions’.

The purpose of our article is therefore to reassess

existing literature on tensions in IORs by applying

the paradox dynamic equilibrium frameworkof Smith

and Lewis (2011). We review 143 studies that inves-

tigate value co-creation and value capture in IORs.

The application of the paradox framework to this lit-

erature enables us to integrate factors that lead to

salient paradoxical tensions in IORs, factors that re-

solve the paradoxical tensions, thus spurring virtuous

cycles, and factors that promote vicious cycles, ow-

ing to the emphasis on either value co-creation or

capture.

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