Interfirm Collaboration and Firm Value in Software Ecosystems: Evidence From Cloud Computing

Abstract

In a rapidly evolving cloud computing industry, legacy software vendors are racing to transform their existing business models to compete against both established and emerging cloud "native" software vendors. To cope with these challenges, vendors are forming partnerships with other firms to access and leverage new and complementary resources, capabilities, and knowledge. Building on prior work on two traditionally distinct literature streams-interfirm networks and software ecosystems-we theorize that structural characteristics of a software vendor's partner network can influence its firm value. Specifically, we argue and find empirical support that partner network size, interconnectedness, and diversity impact firm value, measured by market capitalization for publicly listed firms and total funding for privately held firms, and that the association between structure and firm value differs by vendor type (legacy versus cloud-native). We explore these associations using a data-driven ecosystem analysis of 5429 firms, apply text analytic methods to differentiate vendors by technology stack focus (infrastructure, platform, software), and complement our empirical analyses with visualizations of the collaborative structure of the cloud computing ecosystem. We conclude with theoretical, methodological, and managerial implications.