From Rugged Landscapes to Rugged Ecosystems: Structure of Interdependencies and Firms’ Innovative Search

Managers and academics are increasingly viewing innovating firms as being interdependent on other firms in the business ecosystem. But how might the structure of interdependencies shape the innovativeness of firms in an ecosystem? To answer this question, we develop a search-based theory that considers a multiplicity of upstream and downstream firms simultaneously innovating in an ecosystem, contributing to and searching for novel combinations of components. We conceptualize two types of structural interdependencies between firms in an ecosystem based on the structure of technological interactions between components and the structure of input–output flows between stages of production. Using a simulation model, we show that downstream firms can benefit from mixing and matching components produced upstream, whereas upstream firms can benefit from optimizing their search more narrowly around their focal components. Importantly, these benefits that accrue to upstream and downstream firms are significantly impacted by the structure of technological and flow interdependencies in the ecosystem.