Ecosystem Evolution and Bottleneck Shifts: Evidence from The Evolution of the Anti-HIV Drug Ecosystem

Strategy & Business Policy

Speaker: Elena Plaksenkova 

Assistant Professor- Ficher College of Business

The Ohio State University

Videoconference

Abstract:

How do bottlenecks -- the loci of value creation and value capture in business ecosystems -- evolve over time? How can firms shape this evolution? To answer these questions, we trace the evolution of the anti-HIV drug industry -- where the standard treatment is a combination of multiple drugs belonging to two distinct components -- between 1997 and 2018.  We examine firms' strategies in terms of the entry into complementary component, developing exclusive complements, and attempts to challenge the existing bottlenecks by offering an alternative pathway to value creation. Using a hand-coded dataset of clinical trials of anti-HIV drugs we find that while firms with inferior offerings attempt to  solve value constraining bottleneck, stronger firms seek, instead, to decrease competition and make their offering a value capture, or strategic, bottleneck, by strategically timing innovation and using exclusive complements. Once the strategic bottleneck emerges, its owners develop bundles with exclusive complements to maintain the bottleneck. However, these strategies may backfire as losing firms in the focal component switch their innovative effort to the complementary component and try to shift the bottleneck to the latter by making the original bottleneck component irrelevant. These findings add more nuanced predictions in terms of how firms react to value creation bottlenecks and offer some of the endogenous drivers of bottleneck evolution.