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Diversification Strategies in the Digital Space: Exploring Supply-side and Demand-side Complementarities

Hueller, F. (2023). Diversification Strategies in the Digital Space: Exploring Supply-side and Demand-side Complementarities. (Unpublished Doctoral thesis, City, University of London)


This dissertation comprises one theoretical and two empirical studies that collectively explore the profound impact of digitalization on diversification strategies within the digital space. The core focus lies in understanding how product and business model diversification strategies evolve in response to digital transformation. Additionally, this dissertation explores the complex supply-side and demand-side mechanisms that facilitate effective digital diversification. The central inquiry guiding this dissertation is twofold: What diversification strategies are adopted in the digital space? And how do supply-side and demand-side complementarities shape diversification, performance, and innovation in platforms and ecosystems? This dissertation aims to shed light on the pivotal mechanisms and drivers underpinning digital diversification—which significantly influence competitive advantage, performance, and innovation—focusing on two closely related and burgeoning conversations: digital platforms and ecosystems.

The first conceptual paper of my dissertation, titled ‘Digital Diversification,’ published as the opening chapter of the Elgar Handbook of Research on Digital Strategy (1), offers a definition and conceptualization of digital diversification vis-à-vis other traditional types of strategic diversification. By integrating the traditional literature on corporate strategy with more recent research on digital business and management, I unveil new opportunities and challenges offered by digital diversification to drive firm growth and competitive advantage. Specifically, I explore both the supply-side implications achieved by leveraging (digital) complementarities across resources and capabilities and the demand-side implications generated by the one-stop-shop and (indirect) network effects. I leverage iconic examples of digital businesses to assess two critical dimensions of digital diversification: digital product diversification and digital business model diversification. Lastly, I discuss the mechanisms that redefine the diversification-performance relationship in the digital context, concluding with a research agenda to advance our understanding of digital diversification.

The second qualitative paper, published in Long Range Planning (2), explores the strategies of platforms in bringing together disparate stakeholders and the diversification of customer engagement mechanisms. The paper examines what demand-side mechanisms enable successful customer interaction in digitally-driven business model diversification. Prior research on business model diversification has primarily focused on supply-side complementarities, such as the synergies among a firm’s resources and capabilities. Yet, the demand side with its customer complementarities remains theoretically and empirically underexplored. By developing a qualitative, longitudinal (1995 – 2018) analysis of the various business models developed by, I 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. Further, I introduce the concept of the ‘integrative business model,’ defined as the business model in a portfolio exhibiting the most customer complementarities with other business models. Ultimately, I propose mechanisms that enable the integrative business model to contribute to sustainable competitive advantage via a causal loop diagram and discuss implications for theory and practice.

The third quantitative paper (3) explores the strategies of platform complementors in bringing together and connecting disparate complementary technologies to offer customers a diversified value proposition and a more integrated consumption. The paper examines what supply-side mechanisms in digitally-driven product diversification enable successful complementor product integration. While prior research on product diversification has primarily focused on supply-side complementarities, this paper shifts the emphasis to ‘digital’ supply-side complementarities. I explore the antecedents of ‘interconnectivity’ among applications—a novel source of value creation that leverages the innovative power of different complementary technologies (i.e., applications) for more integrated service solutions. By developing a quantitative, longitudinal analysis of Apple’s iOS and Google’s Android smartphone ecosystems from 2018 to 2021, I identify and assess critical strategic choices (related to interconnectivity) available to complementors and develop a theoretical framework that considers how two key app-level structural dimensions: connection generality and connection flexibility can influence the extent to which developers can build on their own prior connections and related knowledge and capabilities compared to other developers to introduce new connections. Ultimately, I test the underlying mechanisms (e.g., functional components complementarities) to explain how these dimensions empower applications to provide enhanced, interconnected solutions, diversifying their value propositions.

(1) Aversa, P., & Hueller, F. (2023). Digital diversification. In C. Cennamo, G. Dagnino, and F. Zhou (Eds.), Elgar Handbook of Research on Digital Strategy (pp. 18). Edward Elgar Publishing.
(2) Aversa, P., Haefliger, S., Hueller, F., & Reza, D. G. (2021). Customer complementarity in the digital space: Exploring Amazon’s business model diversification. Long Range Planning, 54(5), 101985.
(3) This paper is a working paper co-authored with my supervisors, Professor Elena Novelli and Professor Paolo Aversa. An earlier version of this paper was presented at the Academy of Management (AoM), Strategic Management Society (SMS) conferences, and the SEI Consortium.

Publication Type: Thesis (Doctoral)
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
Departments: Bayes Business School > Bayes Business School Doctoral Theses
Bayes Business School > Management
Doctoral Theses
[thumbnail of Hueller thesis 2023 PDF-A.pdf] Text - Accepted Version
This document is not freely accessible until 28 February 2027 due to copyright restrictions.


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