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THEORIZING DIGITAL INNOVATION

ECOSYSTEMS: A MULTILEVEL
ECOLOGICAL FRAMEWORK
Ping Wang
University of Maryland, [email protected]

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Wang, Ping, (2019). "THEORIZING DIGITAL INNOVATION ECOSYSTEMS: A MULTILEVEL ECOLOGICAL
FRAMEWORK". In Proceedings of the 27th European Conference on Information Systems (ECIS), Stockholm & Uppsala, Sweden,
June 8-14, 2019. ISBN 978-1-7336325-0-8 Research Papers.
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Wang /Theorizing Digital Innovation Ecosystems

THEORIZING DIGITAL INNOVATION ECOSYSTEMS: A

MULTILEVEL ECOLOGICAL FRAMEWORK

Research paper

Wang, Ping, University of Maryland, College Park, Maryland, USA, [email protected]

Abstract
It is intuitive to conceptualize the environment shaping digital innovations as "ecosystems." However,
the literature on digital innovation and ecosystems reveals silos and fragmentation surrounding the
ecosystem concept despite the holistic approach that the ecological perspective implies. Acknowledg-
ing the limitations of ecological metaphors, in this conceptual paper, we recognize key similarities
between natural and sociotechnical ecosystems and argue that digital innovation research may benefit
from taking the ecological perspective seriously, not just as metaphors, but also as a theory. Specifi-
cally, the concept ecosystem can be applied to multiple levels of the digital innovation landscape, link-
ing diverse entities such as processes, products, services, organizations, industries, and communities,
as they draw on resources, including technology, attention, and knowledge, to create and realize the
value of digital innovations. Further, we synthesize insights on natural and sociotechnical ecosystems
to develop building blocks of a comprehensive ecology theory, as a multilevel platform to advance
digital innovation research. This ecology theory of digital innovation ecosystems will also be able to
pinpoint key levers that practitioners can shape strategically to realize the full potential of digital in-
novations for organizations, communities, and society.
Keywords: Digital Innovation, Ecosystem, Ecology, Innovation Community.

Twenty-Seventh European Conference on Information Systems (ECIS2019), Stockholm-Uppsala, Sweden. 1

Wang /Theorizing Digital Innovation Ecosystems

1 Introduction
Twenty-five years ago, James Moore, then a business consultant fond of ecological metaphors, popu-
larized the term "ecosystem" in business and management (Siegele 2014), which he used to call a clus-
ter of players and their multifaceted relationships in a firm's competitive environment (Moore 1993).
Since then, the term ecosystem and ecological metaphors have been frequently appearing in discus-
sions about digital innovation, with the term ecosystem referring to the broader environment where
diverse innovation stakeholders interact. This ecological perspective is valuable because it goes be-
yond the dominant focus of IT innovation studies on the innovator or on the innovation to conceptual-
ize multiple stakeholders and multiple innovations in a holistic set, just like a biological ecosystem
consisting of different species and natural resources.
However, just a quick glimpse of the literatures on digital innovation and on ecosystems may suggest
that the term ecosystem has become a buzzword: Its use is prevalent but its meaning is often ambigu-
ous and confusing, as people with different interests use the same term to discuss different types and
aspects of digital innovations. The same can be said about the numerous ecological metaphors that
often accompany the term ecosystem. More seriously, there lacks a coherent theory to synthesize the
diverse opinions, experience-based insights, and research findings about digital innovation ecosys-
tems. Consequently, the ecological perspective is at the risk of becoming a management fad
(Abrahamson 1996) in digital innovation research and practice.
Intrigued by the ecosystem concept and aiming to alleviate its fragmentation, in this conceptual paper,
we conducted a literature review about this concept in Information Systems (IS) and Organizational
Studies (OS), two related fields where the meaning and utilities of the term ecosystem have expanded
significantly in the past two decades. This effort revealed an opportunity to build a multilevel ecology
theory for digital innovation ecosystems, going beyond the metaphors to realize the potential of eco-
logical thinking in advancing digital innovation research and practice. Both our literature review (Sec-
tion 3) and theory development (Section 4) were rooted in digital innovation research, to be summa-
rized next (Section 2).

2 Research on Digital Innovation

A digital innovation is "a product, process or business model that is perceived as new, requires signifi-
cant changes on the part of adopters, and is embodied in or enabled by IT" (Fichman et al. 2014, p.
333). For example, drones, 3D printing, or the sharing economy represent digital innovations in the
form of a product, process, or business model, respectively. At least four themes have emerged from
the relatively nascent research on digital innovation. First, a digital innovation often consists of multi-
ple components, which are often structured in a "layered modular architecture" (Yoo et al. 2010), "a
hybrid between a modular architecture and a layered architecture" (p. 728).
The second theme addresses the blurring or fluid boundaries of products, processes, organizations,
industries, and markets (Constantiou et al. 2017; Nambisan et al. 2017). For example, the boundaries
of the automobile industry have been broken by digital innovations such as GPS, mobile phones, and
autonomous vehicles. Third, due to the multiple components of digital innovations and the diverse
actors and actions required to innovate with digital technology, shared cognition and joint sensemak-
ing become crucial in managing digital innovations (Nambisan et al. 2017). Giving and making sense
of a digital innovation are not confined within any organization, but require the undertaking of a col-
lective of actors, often outside the primary providers or adopters of the focal innovation.
These themes bring us to the last theme: open innovation – "the use of purposive inflows and outflows
of knowledge to accelerate internal innovation and expand the markets for external use of innovation"
(Chesbrough 2012, p. 20). Many innovations are both digital and open, because digital products, pro-
cesses, and business models have multiple components that are offered and utilized by diverse actors
with blurring or fluid boundaries, and because open innovations rely on digital technology to open the
organizational boundaries to reach the actors in a broader setting. This broader setting is often called

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Wang /Theorizing Digital Innovation Ecosystems

an "ecosystem" in research on digital innovations (Bharadwaj et al. 2013; Fichman et al. 2014;
Nambisan et al. 2017; Yoo et al. 2012) and on open innovations (Chesbrough et al. 2014).

3 Research on Ecosystems Related to Digital Innovation

We reviewed research on ecosystems in IS and OS. In IS we considered the ICIS proceedings and the
eight journals in the "Senior Scholars' Basket of Journals." In OS we considered the proceedings of
Academy of Management (AoM) Annual Meetings and six leading journals, including Academy of
Management Journal, Academy of Management Review, Administrative Science Quarterly, Organiza-
tion Science, Organization Studies, and Strategic Management Journal. We also considered Manage-
ment Science, a leading journal that covers both IS and OS topics. Together, these 15 journals and 2
conference proceedings represented the writings of the scholars in both fields. If the title or abstract of
an article published in any of the above outlets since 1990 included the word "ecosystem," we down-
loaded the article and its metadata (title, abstract, author, publication date, etc.). As a result, 386 arti-
cles meet the above query criteria and were collected for our literature review. In addition, we also
added the 42 articles from a recent pioneering study (Nischak et al. 2017), where the authors selected
and reviewed articles based on searching keywords (including "ecosystem" and "information technol-
ogy" among others) in article abstracts in three prominent bibliographic databases (JSTOR, EBSCO,
and AISeL). Excluding the 5 duplicate articles due to the overlap between the two collections, in total
423 (=386+42-5) articles formed a good sample of extant knowledge about ecosystem in IS and OS.

3.1 Differences and Commonalities among Ecosystems

Over the past 29 years (1990-2018), research that applied the ecosystem concept in IS and OS has ex-
amined a variety of subjects as the primary foci of the ecosystems. We review briefly each type of
ecosystems below, and then highlight their differences and commonalities.
In the context of IS development within firms, the notion of business process ecosystem was proposed
to understand business-IT alignment, resulting from the coevolving parts of the ecosystem, including
business users, business processes, IT developers, and software services (Vidgen and Wang 2006).
Most conceptualizations of ecosystems, however, go beyond the firm boundaries. A product ecosys-
tem includes not only a focal product, but also additional complementary products and services (e.g.,
training and support), or other elements needed to create a whole solution for customers to buy (Frels
et al. 2003). A familiar example is the product ecosystem for Apple's iPhone, consisting of the focal
product iPhone, complementary products such as the apps developed by Apple and numerous third-
party developers, accessories made by various vendors, audio and video contents made available on
the platform, and customer services and training programs.
Service ecosystems are defined as "relatively self-contained self-adjusting systems of resource-
integrating actors connected by shared institutional logics and mutual value creation through service
exchange" (Vargo and Akaka 2012, p. 207). For example, the door-to-door mobility integrator service
ecosystem consists of customers and various mobility providers such as car-sharing, bus or train com-
panies, government agencies, and industry associations (Schulz and Überle 2018).
Instead of focusing on product/service, a business ecosystem "includes, for example, companies to
which you outsource business functions, institutions that provide with financing, firms that provide the
technology needed to carry on your business, and makers of complementary products that are used in
conjunction with your own. It even includes competitors and customers when their actions and feed-
back affect the development of your own products or processes. The ecosystem also comprises entities
like regulatory agencies and media outlets that can have a less immediate, but just as powerful, effect
on your business" (Iansiti and Levien 2004, p. 69).
Sometimes a business ecosystem is based on a platform, a foundation technology or service that is es-
sential for a broader, interdependent ecosystem of businesses (Gawer and Cusumano 2008). Platform-
based ecosystems are the subject of the most vibrant stream of ecosystem research in IS and OS (e.g.,
Huber et al. 2017; Parker et al. 2017; Tiwana 2015; Van Alstyne et al. 2016). This stream examines

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Wang /Theorizing Digital Innovation Ecosystems

the governance by the platform owner and complement providers, the architecture of the platform, and
the impacts of governance and architecture on the evolution of the ecosystem (Tiwana et al. 2010).
Since business today is increasingly driven and enabled by digital technology, business ecosystem is
becoming increasingly digital. Synthesizing their review of the literature on ecosystems, Nischak et al.
(2017) defined a digital business ecosystem as "a flexible combination of heterogeneous actors, inter-
acting coopetitively by fundamentally drawing on a shared set of digital resources in conjunction with
nondigital resources driven by the underlying perception that engaging in joint value creation increas-
es individual chances of survival and growth" (p. 13).
Focusing on different yet related technologies, a technology ecosystem is "an environment that con-
tains populations of technologies organized as overlapping hierarchies with many interdependent rela-
tionships" (Adomavicius et al. 2008a, pp. 117-118). Technologies in an ecosystem play different roles
including (1) support and infrastructure, (2) product and application, and (3) component of the prod-
uct/application. Applying this perspective to information technology (IT), Adomavicius et al. (2008b)
defined IT ecosystem as "a subset of information technologies in the IT landscape that are related to
one another in a specific context of use" (p. 783).
Since the technologies are interdependent in their ecosystems, innovations in and with these technolo-
gies are also interdependent in what is called innovation ecosystems. Innovations in TV sets produced
very high picture quality, but innovations in studio production equipment and signal compression
technologies were falling behind, causing HDTV's disappointing performance initially in the market
(Adner 2006). Therefore, to succeed individually and collectively, participants in an innovation eco-
system need to make collaborative arrangements to combine their individual offerings into a coherent,
customer-facing solution (Adner 2006). Since digital technologies make process and product innova-
tions programmable, sensible, and searchable, and they reduce the costs of coordination, many innova-
tion ecosystems are therefore digital innovation ecosystems.
All in all, the ecosystems we reviewed above differ in their foci and levels of analysis (e.g., intra-
organizational, organizational, and inter-organizational). Despite these differences, there are substan-
tial commonalities across the various types of ecosystems reviewed above. First, digital technology is
present in many ecosystems, either as the focus itself, or a key enabler for the activities essential to the
ecosystems. Second, most ecosystems reviewed above do not have clearly defined boundaries. This is
a key characteristic of digital innovation. Given the prevalence of digital technology, it is not surpris-
ing that open or fuzzy boundaries are found in various types of ecosystems. Lastly, ecological meta-
phors are present in most of the ecosystem definitions. Species coexist with competitive and symbiotic
relationships in natural ecosystems, in seemingly similar ways that actors compete and collaborate in
sociotechnical ecosystems. Despite these intuitive connections, ecological metaphors have their limits.

3.2 Limitations of Ecological Metaphors

Natural and sociotechnical systems are fundamentally different. First, a sociotechnical ecosystem is
commonly considered a designed, developed, and managed system with a purpose. In contrast, the
teleology of natural ecological systems, i.e., whether their evolution is directed toward an end or
shaped by a purpose, is debatable (Esbjorn-Hargens et al. 2011; Oh et al. 2016). Second, natural and
sociotechnical systems evolve at very different rates. The evolution of natural systems may be far
slower, at its maximal Darwinian rate, than that of sociotechnical systems (Gould 1987). Third, eco-
logical phenomena in natural systems are metaphorical in sociotechnical systems, but with very differ-
ent meanings. For example, regarding speciation, biological evolution is a system of constant diver-
gence (once distinct, lineages are separate forever) (Gould 1987), whereas technology speciation is
characterized by both divergence and convergence (Cattani 2006).
In addition to these differences, several problems emerge from using ecological metaphors to under-
stand sociotechnical systems. First, the advantages of using the prefix "eco" are not always clear. For
example, it has been questioned whether innovation ecosystems are the same as innovation systems in
previous research (Oh et al. 2016). Second, there seems confusion about the levels at which the term
ecosystem is used. For instance, the notion of business ecosystem, as a network of stakeholders rele-

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Wang /Theorizing Digital Innovation Ecosystems

vant to a focal business, is closer to the biological term "community" than to "ecosystem" (Iansiti and
Levien 2004), because the former refers to, aptly, a group of different populations of species in an ar-
ea, whereas the latter usually consists of a community and its physical environment. Regardless of this
subtlety, the focal business in a business ecosystem corresponds to a focal species in a natural ecosys-
tem. Yet this metaphor is problematic because the focal business, as a single organization, is analo-
gous to a population of only one organism, suggesting a species going extinct soon, which is not the
case for the focal business in many business ecosystems (e.g., Apple in Apple's business ecosystem).
Lastly, due to the different foci and different levels of analysis in using ecological metaphors, soci-
otechnical ecosystems are being examined in intellectual and practical silos as the structures and per-
formances of these ecosystems are gauged by idiosyncratic measures (Oh et al. 2016). For example,
the desired outcome of business process ecosystem is business-IT alignment (Vidgen and Wang 2006),
as opposed to success in the marketplace for product ecosystems.
To solve these problems, in what follows we take a closer look at the similarities between natural and
sociotechnical ecosystems, which we find far outweigh their differences. We therefore argue that eco-
logical insights should be taken seriously, not just as metaphors, but also as building blocks for a theo-
ry for understanding digital innovations and accounting for the various actors and their relationships at
different levels of a digital innovation ecosystem.

4 Toward an Ecology Theory of Digital Innovation Ecosystems

As a special type of sociotechnical systems, a digital innovation ecosystem is a dynamic collective of
interdependent actors and the resources they draw on to innovate with digital technology. In contrast,
a natural ecosystem is "a dynamic complex of plant, animal and micro-organism communities and
their non-living environment interacting as a functional unit" (United Nations 1992, p. 3). Digital in-
novation ecosystems and natural ecosystems share a few similarities.

4.1 Similarities between Natural and Digital Innovation Ecosystems

First, both types of ecosystems have interdependent and co-evolving components. In a natural ecosys-
tem, relationships among species may be characterized as competition, predation, herbivory, parasit-
ism, mutualism, or commensalism. Further, living organisms depend on non-living resources, such as
air, water, and soil, which in turn may be affected by the activities of living organisms. These interde-
pendencies drive the coevolution among the species in the ecosystem, and between organisms and the
environment. Similarly, among the actors in a digital innovation ecosystem, business users and IT de-
velopers, for example, may rely on each other as they innovate the business processes with cloud-
based digital technologies. A firm depends on the providers of the components and complements of
the firm's focal product to pursue innovations in a product package, as a coherent solution for the cus-
tomers. In addition to the actors, resources such as digital infrastructure and applications and non-
digital resources such as human and social capital are also key components of a digital innovation eco-
system because actors draw on these resources to develop, disseminate, and deploy digital innovations.
Second, both types of ecosystems are dynamic and open systems. A natural ecosystem does not have
clearly defined, impermeable boundaries, as various species enter or exit the system, and as energy
flows and chemicals cycle through the system. Similarly, a digital innovation ecosystem also has per-
meable and blurring boundaries. Actors and resources are not confined within any innovation ecosys-
tem. Rather, they may belong to and move across multiple ecosystems.
Third, both types of ecosystems function through similar processes. Energy flow and chemical cycling
are essential to the functioning of a natural ecosystem. Correspondingly, value exchange is a process
essential to digital innovation ecosystems (Nischak et al. 2017). As actors innovate with digital tech-
nology, they create, distribute, and capture value, i.e., benefits of operational, economic, political,
and/or social significance. With the closed innovation approach, value is exchanged (primarily among
business partners and employees) within the innovating firm. Firms taking the open innovation ap-
proach invite outsiders to co-innovate and thus co-create value that no single firm can do alone

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Wang /Theorizing Digital Innovation Ecosystems

(Annanperä et al. 2015). Yet most of the value co-created from open innovation may be captured by
the focal firm. Therefore, value exchanges in both closed and open innovations may favour the focal
firm. In contrast, actors in a digital innovation ecosystem exchange value in digitally enabled value
networks (Pagani 2013), corresponding to the food network and trophic structure in natural ecosys-
tems. Who creates value and how value is distributed depend on the interactions among the actors of
the ecosystem, not necessarily determined by or favouring the actor who initiates the system.
Because of these similarities, key attributes of a natural ecosystem can be applied aptly to describe a
digital innovation ecosystem: (1) size/density: number of actors in an ecosystem, (2) vitality: rates at
with actors join or exit an ecosystem, (3) diversity: differences within and between groups of actors,
(4) structure: ways actors and their relationships and actions are arranged, and (5) resilience: the ca-
pacity to endure disturbances. Despite these common characteristics and attributes, the scope of digital
innovation ecosystems differs widely, encompassing innovations at different levels of analysis. We
address this varying scope next.

4.2 Varying Scope of Digital Innovation Ecosystems

"An [natural] ecosystem can encompass
Landscape
a large area, such as a lake, forest, or Ecosystem Multiple
island, or a microcosm, such as the Community Product Categories
space under a fallen log or a small desert Category
Population
spring" (Urry et al. 2017, p. 1236). The Product/
versatility of the ecosystem concept al- Business Model

lows us to apply ecosystem analysis to Organization

the multiple forms of digital innova- Process/Product

tions, including process, product, busi-

ness model, product category, and mul-
tiple categories, as well as to the entities
shaping these different forms of innova- Figure 1. A Nested Ecological Typology
tion at different levels such as organiza- A smaller unit of analysis is nested inside a larger unit of
tion, industry, community, ecosystem, analysis. The boundary of each level is permeable. For
and landscape. These different levels example, each organization is nested in one or more pop-
correspond to the varying scope of ecol- ulations. One community consists of multiple populations.
ogy, including organismal ecology, population ecology, community ecology, ecosystem ecology, and
landscape ecology. Figure 1 depicts a typology of these nested ecological units. Hence, the term eco-
system has two senses here: the broad sense is that ecosystem analysis, due to its versatility, can be
applied to any level of the ecological typology; the narrow sense is that ecosystem analysis is at the
layer between community and landscape, dealing specifically with how communities and their re-
sources interact and coevolve. With this clarification in mind, we now apply ecosystem analysis (in
the broad sense) to the different levels of digital innovation, using Table 1 as both the guide for and
summary of our analysis. We start from the organizational level.

4.2.1 Organizational Ecology of Digital Innovation

Organismal ecology, "which includes the subdisciplines of physiological, evolutionary, and behav-
ioural ecology, is concerned with how an organism’s structure, physiology, and behaviour meet the
challenges posed by its environment" (Urry et al. 2017, p. 1163). We map organisms in ecology to
organizations in digital innovation ecosystems. Strictly speaking, neither an organism nor an organiza-
tion is an ecosystem. Nonetheless, considering that ecosystem analysis can be applied to even micro-
cosm, we conceptualize an organization and its internal and external environment as an ecosystem.
The internal environment is important to digital innovations in the forms of new processes or new
products enabled by digital technology. For example, the notion of business process ecosystem may
benefit from ecological insights at the organizational level (Vidgen and Wang 2006). The components
of a business process ecosystem (business users, business processes, IT developers, software services,

Twenty-Seventh European Conference on Information Systems (ECIS2019), Stockholm-Uppsala, Sweden. 6

Wang /Theorizing Digital Innovation Ecosystems

Levels of Form of Inno- Type of Ecosys- Actors Resources Value Exchange Research Questions
Analysis vation tem
Organizational Process Business process Business users and IT Business processes, Business-IT align- In digital innovation ecosystem for
Ecology Product/Service ecosystem developers software services, ment and business business processes,
and business process process innovation RQ1: how ecosystem size and structure
management (BPM) (e.g., number of business users, IT de-
velopers, processes, size of software,
and BPM) affect performance (e.g.,
alignment and innovation)?
Population Product/Service Business ecosys- Outsourcing partners, Enterprise systems Social and econom- In digital innovation ecosystem for
Ecology Business Model tem and prod- investors, tech ven- (ERP, CRM, and ic value created business, product, or service,
uct/service eco- dors, component and business intelli- and captured by RQ2: how legitimacy and competition
system at firm compliment provid- gence), digital plat- each actor, and affect ecosystem vitality (entry/exit)?
level (including ers, customers, com- forms, and infra- product or service
platform-based petitors, and regula- structure innovation RQ3: how control by platform owner
ecosystem) tors affects ecosystem vitality (entry/exit)?
Community Product/Service Ecosystem for Populations of organ- Collective attention Social and econom- In digital innovation community for
Ecology Category product, service, izations with interests and knowledge car- ic value of innova- business, product, or service category,
or technology in producing and/or ried by discourse tion RQ 4: what combination of roles and
category (e.g., using innovations in a vehicles (e.g., news capabilities and what relationships af-
technology eco- product, service, or releases, annual re- fect community vitality and perfor-
system and inno- technology category ports, analyst re- mance?
vation ecosystem) ports, news articles,
Ecosystem Product/Service research papers, Identity of product, In digital innovation ecosystem for
Ecology Category conferences, books, service, or technol- business, product, or service category,
etc.) ogy category RQ5: how hype and discourse vehicle
affect ecosystem vitality and perfor-
mance?
Landscape Multiple Cate- Multiple ecosys- Actors in multiple Resources in multi- Effect of other eco- In digital innovation landscape,
Ecology gories of Prod- tems of various ecosystems ple ecosystems systems on the fo- RQ6: how vitality and performance of
uct/Service types cal ecosystem one ecosystem affect those of other
ecosystems through multi-ecosystem
membership?
Table 1. Varying Scope of Ecosystem Analysis of Digital Innovation

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Wang /Theorizing Digital Innovation Ecosystems

and possibly other entities), like organisms and their resources in a natural ecosystem, all need to adapt
to the changing environment. Because these components are interdependent, their adaptations are in-
terdependent, making themselves coevolving with each other in the ecosystem. As the actors (e.g.,
business users and IT developers) align their objectives and activities, they utilize resources such as
business processes, software services, and business process management (BPM) methods and tech-
niques. These actors co-create and share value, i.e., business-IT alignment and innovations in the busi-
ness processes. These coevolution, value exchange, and innovations can be facilitated by digital tech-
nology such as collaboration software and operational intelligence tools. Hence some business process
ecosystems are digital innovation ecosystems at the organizational level.
Several key attributes of the ecosystem may affect its performance – the extent to which business and
IT are aligned and the quantity and quality of process innovations. First, ecosystems with a large num-
ber of business users and IT developers are likely to have a large number of objectives represented and
activities involved. While more objectives are harder to meet and more activities are more challenging
to coordinate, making it more difficult to achieve business-IT alignment, a larger pool of knowledge in
a larger ecosystem may produce creative ways to innovate business processes.
Second, to facilitate the coevolution and improve the overall fitness of the components, managers may
change the ecosystem by modifying ecological parameters such as the number of the business process-
es and the size of the software services to support those processes (Vidgen and Wang 2006). Other
things equal, more business processes may provide more opportunities for specific needs to be satis-
fied, but the increased complexity that comes with more processes may dampen or erase those oppor-
tunities. Similarly, large software services or packages developed to address various business needs
comprehensively, as substantiated by research on enterprise systems (Davenport 2000; Lyytinen and
Newman 2015), tend to address specific business needs less effectively than smaller, best-of-breed
software services. However, large software services often have more functions than any best-of-breed
software service and thus large services may be able to address many business needs even though
these packages cannot address specific needs so well as small software services.
Lastly, business process management (BPM) has become a mature discipline that offers a variety of
methods and tools to monitor and improve business processes. Some have argued that contemporary
BPM obliterates the business-IT divide because business users can use the BPM tools to develop and
deploy their own processes (Smith and Fingar 2003). However, this argument still needs empirical
testing as the assumption that BPM replaces IT developers or that business users and IT developers
converge in the ecosystem may not always hold. In sum,
Research Question 1: In a digital innovation ecosystem for business processes, how do the size and
structure of the ecosystem (e.g., number of business users, IT developers, processes, size of software,
and BPM) affect it performance (e.g., business-IT alignment and process innovation)?
Regarding an organization's external environment, the closest ecological unit is the industry to which
the organization belongs. As digital technology blurs or breaks down industry boundaries, product
ecosystems, service ecosystems, and platform-based ecosystems are formed at or around this level,
which corresponds to the populations of organisms in ecology.

4.2.2 Population Ecology of Digital Innovation

"A population is a group of individuals of the same species living in an area. Population ecology anal-
yses factors that affect population size and how and why it changes through time" (Urry et al. 2017, p.
1163). In Organizational Studies, population ecology is a theory to explain the "forces that shape the
structures of organizations over long time spans" (Hannan and Freeman 1989, p. xi). This theory rec-
ognizes the limits of organizations' abilities to adapt to the changes in the environment and suggests
that different environmental conditions favour different types of organizations. Organizations that rely
on the same environment must find ways to coexist and this coexistence is often a double-edged
sword. Presence of similar organizations provides legitimacy for that type of organizations (Meyer and
Rowan 1977). At the same time, similar organizations rely on similar resources, forcing them to com-
pete for the ultimately finite resources they need. As a population of similar organizations emerges,

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Wang /Theorizing Digital Innovation Ecosystems

increasing legitimacy attracts new organizations and reduces the chances of failure for those already in
the population. As the population grows, increasing competition discourages new entries and causes
incumbents to fail. Accordingly, population density is often used, in normal and quadratic forms, to
measure legitimacy and competition, respectively, in a population or industry (Hannan et al. 1995).
For over four decades, organizational researchers have studied ecological processes primarily at the
population level (Astley 1985; Baum and Amburgey 2002).
Digital innovation ecosystems at the population level include business ecosystems, product ecosys-
tems, or service ecosystems enabled by digital technology. Each type of ecosystem forms around a fo-
cal business, product, or service, encompassing actors from more than one population or industry. Yet
within each population involved in the ecosystem, both legitimacy and competition still matter, as may
be explained by population ecology theory. Among the actors in a business ecosystem, the outsourcing
partners, investors, technology vendors, component and complement providers, and customers all
would like to be associated with a legitimate business. The more members in a specific population in a
business ecosystem, the stronger the signal that the focal business is legitimate. At the same time,
crowded populations are competitive, as competition manifest among not only venders vying for lu-
crative contracts, but also component and complement providers seeking customers, as well as cus-
tomers bidding for the finite supply of products or services. Digital technology offers a variety of re-
sources for actors to function and interact in ecosystems at the population level. These resources in-
clude enterprise software (such as enterprise resource planning-ERP, customer relationship manage-
ment-CRM, and business intelligence), digital platforms, and infrastructure. These resources have
lowered the barriers to entry, but the same logics regarding legitimacy and competition may still apply
to digital innovation ecosystems for a business, product, or service. Therefore,
Research Question 2: In a digital innovation ecosystem for business, product, or service, how do le-
gitimacy and competition affect the vitality (entry/exit rate) of the ecosystem?
Ecosystems based on platforms are a special case of business ecosystems. A firm develops and con-
trols a product, service, or technology which serves as the foundation on which a larger number of
firms can build complementary innovations (Gawer and Cusumano 2014). A large portion of IS re-
search on platform-based ecosystem is focused on the tension between control by a platform owner
and autonomy among independent developers (Tiwana et al. 2010). Proper control, in the forms such
as development guidelines and screening, ensures compatibility and consistency among the products
or services offered on the platform. Too much control, however, may stifle innovation and reduce the
incentives for developers to join or stay in the ecosystem. Therefore,
Research Question 3: In a digital innovation ecosystem for business, product, or service based on a
platform, how does control by the owner of the platform affect the vitality of the ecosystem?
Product/service ecosystems are formed to support specific products (e.g., DJI's drones) and services
(e.g., Amazon Web Services). Broader ecosystems can also emerge to support whole categories of
products, services, or technologies, such as the ecosystems for drones and cloud computing. To under-
stand the ecosystems for product, service, or technology categories, we turn to community ecology.

4.2.3 Community Ecology of Digital Innovation

"A community is a group of populations of different species in an area. Community ecology examines
how interactions between species, such as predation and competition, affect community structure and
organization" (Urry et al. 2017, p. 1163). "Ecologists define the boundaries of a particular community
to fit their research questions: They might study the community of decomposers and other organisms
living on a rotting log, the benthic community in Lake Superior, or the community of trees and shrubs
in Sequoia National Park in California" (Urry et al. 2017, p. 1213). In an ecological community, di-
verse species play different roles in the community's trophic structure and the relationships among
populations range from competition, predation, herbivory, parasitism, mutualism, to commensalism.
In sociotechnical terms, an innovation community is comprised of interdependent populations of or-
ganizations with interests in producing and/or using an identifiable category of product or service in-
novations (such as drones, smartphones, or internet of things) (Lynn et al. 1996; West and Lakhani

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Wang /Theorizing Digital Innovation Ecosystems

2008). The key difference from a business/product/service ecosystem is that, in an innovation commu-
nity, the focal product or service category does not belong to any organization, but to the community.
Community for
Community for Innovation C
Innovation A Demand

Government Venture User Market

Investors Capitalists Organizations Researchers

Corporate Production of Ad Use of Innovations General

Innovations Media
Labs Agencies Public
Basic Research Comprehension
Applied Research Adoption
Designers Product Development Regulators Financiers Implementation Distributors
Community for Manufacturing Assimilation
Innovation B Marketing Abandonment
Government
Universities Universities Consultants
Labs

Supply

Figure 2. A Landscape of Three Innovations and Their Communities

Regarding the production of innovations, Hage and Hollingsworth (2000) conceptualized "idea inno-
vation networks" consisting of six functional arenas (basic research, applied research, product devel-
opment, production research, quality control, and commercialization). In ecological terms, innovations
are produced by not only populations of basic research such as government labs and universities, but
also populations of design firms, venture capitals, ad agencies, wholesalers, and retailers, whose ac-
tivities are regulated by industry associations and/or federal and state governments (Figure 2).
Yet, this broader view of innovation production shows only half of the puzzle. Innovations must be
used to realize their social and economic value (Edgerton 2007; Hsieh et al. 2011). From the Diffusion
of Innovation perspective (Rogers 2003), Swanson and Ramiller (2004) characterized the core activi-
ties of applying IT innovations as comprehension, adoption, implementation, and assimilation. These
activities may not progress sequentially and can, if the conditions are not right, lead at any point to the
abandonment of the innovation. For this reason, each adopter's innovation journey is supported and
affected by populations of consultants, research firms, news agencies, universities, financial institu-
tions, media companies, and other adopters of the innovation (Figure 2). While symbiosis among these
populations seems self-explanatory, competition can take many forms, including competition among
the adopters for experts' knowledge, among consultants for innovation users, and among vendors for
partners, implementers, and media coverage.
A recent study of the CRM innovation community revealed that diverse populations of organizations,
involved in the production and use of CRM innovations and they played different roles, including aca-
demic researcher, adopter, consultant, industry researcher, and technology provider (Wang et al.
2015). While actors playing each role bring their capabilities and make contributions (intellectual or
material) to the innovation community, it is not clear which roles and capabilities are essential to the
vitality and performance (e.g., distinctive category identity) of the community and when they matter.
Corresponding to the various relationships among species in an ecological community, relationships
among actors in an innovation community are also manifold. A study on the cloud computing innova-
tion community found organizations there had various relationships with each other, including compe-
tition, collaboration, adoption, research, and investment (Sun and Wang 2012). Although these varied
relationships connect diverse actors from different industries and playing different roles, it remains
unclear which relationships are important to the community. Therefore,
Research Question 4: In a digital innovation community for business, product, or service category,
what combination of roles and capabilities and what relationships among the actors affect the vitality
and performance of the community?

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Wang /Theorizing Digital Innovation Ecosystems

In an innovation community, to create and capture the social and economic value of the innovation,
diverse actors interact not only with each other, but also with the resources in the community. The in-
teractions between actors and resources are the focus of ecosystem ecology.

4.2.4 Ecosystem Ecology of Digital Innovation

"An ecosystem is the community of organisms in an area and the physical factors with which those
organisms interact" (Urry et al. 2017, p. 1163). Since communities can be large or small, the scope of
ecosystem analysis varies significantly from microcosm to a large area. Regardless of the size of the
ecosystem, ecosystem ecology is concerned with how energy flows and chemicals cycle as organisms
interact with the resources in the environment. In a digital innovation ecosystem for a product, service,
or technology category, the resources include not only those available to the actors in their respective
populations, but also the resources available across the populations throughout the community and
ecosystem. While most material resources such as enterprise software and digital platform are owned
by certain actors, intangible resources such as collective attention and knowledge can transcend organ-
izational and industry boundaries and spread to every corner of the ecosystem and beyond, just like
energy and chemicals flowing through a natural ecosystem. Actors contribute to and utilize the collec-
tive attention and knowledge in order to make sense of the innovation collectively (Nambisan et al.
2017). In doing so, they help, to varying degrees of success, establish and maintain an identity for the
product, service, or technology category. An identifiable category is an essential condition for value
exchange at the ecosystem level because, without an identifiable category for the innovation, it would
be difficult for any actor to create and capture the social and economic value of the innovation.
Attention flows across multiple levels of a digital innovation ecosystem. Gartner's Hype Cycles, a
graphic tool based on IT market analysts' opinions, portray the evolving visibility of various digital
innovations and the collective attention to these innovations paid by members of the innovation com-
munities (Fenn and Raskino 2008). Although attention is a notoriously scare resource (Simon 1971),
due to the hard work of idea entrepreneurs such as consultants and analysts (Abrahamson and
Fairchild 2001), certain hyped innovations may garner management attention out of proportion to the
ultimate benefits flowing from their actual use (Fichman 2004). Despite the stigma associated with it,
hype does help attract attention from prospective participants. On the other hand, incumbents disap-
pointed by the hyped product or service may choose to leave the ecosystem.
Attention alone cannot guarantee successful implementation or the realization of value from the inno-
vation (Swanson 2012). Knowledge is another important type of resources in a digital innovation eco-
system. Innovations require people and organizations to learn and to create knowledge to develop and
utilize the innovations. While it is by now well accepted that practice-based learning-by-doing often
conducted in communities of practice fosters innovation (Brown and Duguid 1991; Lave and Wenger
1991), discourse-based learning among heterogeneous members of an innovation community may be
far more prevalent and important than we expect (Wang and Ramiller 2009). This community learning
relies on various discourse vehicles, such as news releases, annual reports, analyst reports, news arti-
cles, research papers, conferences, and books, to fit the diverse learning preferences of prospective
participants. For incumbents already in the ecosystem, those engaging in discourse such as analysts
and academics are less likely to exit with more discourse vehicles to employ. However, those not en-
gaging in discourse are likely to be unaffected by discourse vehicles. Together, both the varying
amount of attention and changing quantity and quality of knowledge may shape the vitality and per-
formance of the ecosystems. Therefore,
Research Question 5: How do hype and the availability of discourse vehicles associated with a prod-
uct, service, or technology category influence attention flow and knowledge exchange in a digital in-
novation ecosystem for the category, affecting the vitality and performance of the ecosystem?
While ecosystem ecology allows us to understand the inner workings of an ecosystem, our world is
populated by many ecosystems and their interactions fall within the purview of landscape ecology.

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Wang /Theorizing Digital Innovation Ecosystems

4.2.5 Landscape Ecology of Digital Innovation

"A landscape (or seascape) is a mosaic of connected ecosystems. Research in landscape ecology fo-
cuses on the factors controlling exchanges of energy, materials, and organisms across multiple ecosys-
tems" (Urry et al. 2017, p. 1163). Accordingly, an innovation landscape is a collage of interdependent
innovation communities that deploy resources to produce and use innovations. In Figure 2, three inno-
vations and their associated communities (A, B, and C) appear in the landscape. Community bounda-
ries are porous allowing individuals, groups, and organizations to either move between or simultane-
ously participate in multiple activities or communities. As resources flow across innovation communi-
ties, production and use of one innovation may become dependent on the supply and demand of re-
sources associated with the innovations in other communities and ecosystems. Consequently, related
innovations may have significant effects on the trajectories and value of the focal innovation.
In a digital innovation landscape, the ecosystems have competitive or symbiotic relationships and in-
teractions. For example, if a component (e.g., battery) or complement (e.g. charging stations) in a new
technology's ecosystem is underdeveloped, then the new technology (e.g., fully electric cars) cannot
take off to replace the old technology (e.g., gasoline-fuelled cars), especially if the old technology has
opportunities to improve in its own ecosystem (Adner and Kapoor 2016). More broadly, the innova-
tion landscape is essentially the "context of use" where ecosystems relate to and interact with each
other (Adomavicius et al. 2008b). In the context of use, the actors and resources in the ecosystems for
related technologies interact (compete, cooperate and collaborate). For example, PC, hard disk drive,
and wireless networks are closely related in the context of use and thus their respective ecosystems
have strong, mostly collaborative interactions. Further, it has been argued that innovations that com-
bine ideas from different domains/ecosystems, within or beyond any context of use, are more likely to
be breakthroughs than those based in only a single domain/ecosystem (Ogle 2007; Podolny and Stuart
1995). For this to happen, actors must have membership in multiple ecosystems, just as, in nature,
some species use more than one ecosystem and live on the borders between ecosystems (Urry et al.
2017). Therefore,
Research Question 6: How do the vitality and performance of one ecosystem affect those of other
ecosystems through multi-ecosystem membership in a landscape of digital innovations?

4.3 Summary and Contributions to Digital Innovation Research

As Table 1 summarizes, we have mapped the different forms of digital innovations and their ecosys-
tems on the layers of a multilevel model of digital innovation ecosystems. These layers correspond to
the varying scope of ecological research, and the actors, resources, and value exchanges we identified
in each layer correspond to the living organisms, natural resources, and ecological processes, respec-
tively, in natural ecosystems. This study contributes to digital innovation research by addressing the
problems identified in Section 3.2.
First, regarding the value of the "eco" prefix and ecological perspective overall, this study shows that
digital innovation is a multilevel phenomenon and that ecosystem analysis, thanks to its versatility, has
a good fit with the multilevel nature of digital innovations. The layered-modular architecture of digital
innovations is highly compatible with the ecosystem structure, allowing distinct yet interdependent
actors to coordinate without full hierarchical fiat (Jacobides et al. 2018). Further, the ecosystem con-
cept provides a holistic and productive basis for understanding actors, their actions and relationships,
and the resources and their interactions with the actors at and across levels of a sociotechnical system.
Second, regarding the confusion about the level of analysis in the studies of digital innovation ecosys-
tems, we note that the confusion has been caused partially by the ability of the ecosystem concept to
be extended across scales (Willis 1997). Fortunately, once the scale is specified, the confusion can be
clarified and research findings can be compared at the proper level. For example, distinguishing be-
tween a product ecosystem and an ecosystem for a product category may make it easy to determine
whether to include certain actors and interactions in the analysis. Generally speaking, for instance,
market research analysts are more relevant to a product category ecosystem than to a product ecosys-

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Wang /Theorizing Digital Innovation Ecosystems

tem. Further, certain ecosystem measures are dependent upon specific scales or levels. For example,
business-IT alignment is a specific performance measure for ecosystems at the business process level,
whereas platform control is a governance issue specific to platform-based ecosystems.
Finally, this scale-dependency does not mean that ecosystem analysis is bound to fragment or has to
be done in silos. At the very least, taking stock of extant knowledge with this multilevel framework
allows us to see underexplored areas such as community ecology, landscape ecology, and ecosystem
structure and performance. Further, the degree of scale-dependency can be assessed at different levels.
For example, the notion that legitimacy and competition affect ecosystem vitality has been studied
extensively at the product/population level, and but rarely at the product category/community level
(Sun and Wang 2012). What's more, this multilevel framework allows us to study the interactions be-
tween and across the different levels. As energy flow and chemical cycling never stay at just one layer
of a natural ecosystem, resources in a digital innovation ecosystem move around, across different lev-
els. For example, a longitudinal study of community and organizational learning in the ERP ecosystem
found that organizations contributed local knowledge to the broader community and the community
fed important lessons learned back to organizations (Wang 2009). Such cross-level analysis may en-
rich theories on knowledge and learning, dynamic capabilities, and economic and social values of digi-
tal innovations (Jha et al. 2016; Leong et al. 2016).

5 Conclusion: Advancing Digital Innovation Theory & Practice

In addition to addressing the problems in digital innovation research, this study can help advance the
theory and practice of digital innovation.
Essentially, the ecological model explored here is a multilevel platform for theory development in dig-
ital innovation research. Specifically, the multilevel model, its layers, the ecosystems at each level,
and the research questions are all building blocks of a coherent, comprehensive theory of digital inno-
vation ecosystems. The research questions we raised above illustrate the significant topics found in the
articles in our collection and worthy of further exploration, but by no means do they constitute an ex-
haustive list. A comprehensive theory requires further research on each and every key attribute of eco-
systems (e.g., size/density, vitality, diversity, structure, and resilience). For example, the structure of a
digital innovation ecosystem usually is complex, mixing actors playing different roles and interacting
with multiple types of relationships. Multi-modal network analysis can be employed to understand this
complex structure. Then the question remains what is the optimal structure for the best ecosystem per-
formance. Lastly, the performance of a digital innovation ecosystem, ultimately, is the extent to which
the ecosystem produces, disseminates, and utilizes digital innovations of significant social and eco-
nomic value. What would be a valid measure for performance at each level of the ecosystem and what
factors drive performance? The research questions above may suggest bivariate relationships, but
more advanced modelling techniques should be employed to measure multivariate, nonlinear, and re-
cursive relationships in sophisticated models to predict ecosystem performance. In addition, perfor-
mance may also be reflected in the benefits participants obtains from their ecosystem, called "ecosys-
tem services" (Millennium Ecosystem Assessment 2005). Who gets which benefits? How much
should each player pay for the benefits? A clear understanding of the value networks and value ex-
change activities embedded in a digital innovation ecosystem can help answer those questions.
For practitioners innovating with digital technology, while it is a great way to use ecological meta-
phors to get points across, ecology theory provides a holistic approach to navigating the rough-
terrained landscape of digital technologies and innovations. The value of holism does not come from
the buzz of "everything-is-connected-to-everything-else," but rather, lies in the ability to pinpoint key
levers (such as ecosystem structure, legitimacy, discourse vehicles) that innovators can shape strategi-
cally to realize the full potential of digital innovations for our organizations, communities, and society.

Acknowledgement
This study was supported in part by the U.S. National Science Foundation's grant #IIS-1546404.

Twenty-Seventh European Conference on Information Systems (ECIS2019), Stockholm-Uppsala, Sweden. 13

Wang /Theorizing Digital Innovation Ecosystems

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