Strategic Leveraging: The Top-line Impact of Dynamic Capabilities

Abstract

It is commonly assumed that the world’s most successful companies have built their success on the basis of their own internal competencies and relentless single-handed pursuit of market impact. However, as Iansiti and Levien (2004) show, using examples of Microsoft, Wal-Mart, Dell and others, many of those firms have attained market leadership in their respective industries by developing and nurturing business ecosystems of partner firms. By embedding their competencies in technologically sophisticated and standard-setting platforms have those large firms attracted smaller firms to become partners and enabled them to leverage platforms, build on top of them and pursue particular niche. In doing so, large firms have become keystone players for their industry and expanded their impact, as in addition to their own activity they created basis for activity of bulk of smaller firms (niche players). This leads to the following question: how does such leveraging impact top-line and bottom-line growth of both keystone players and niche players? This paper addresses top-line impact in the context of niche players in the IT industry. Building on dynamic capabilities framework by Teece et al. (1997) and literature on measurement of intangible assets, this paper: i) presents conceptual model that shows how niche players can increase their competitiveness by strategically leveraging competencies of keystone players, and ii) proposes measures to estimate impact of such leverage on top-line growth of niche players.