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Value Capture and Crowdsourcing

Article  in  The Academy of Management Review · June 2013

DOI: 10.5465/amr.2012.0423

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Allan Afuah Christopher L. Tucci

University of Michigan École Polytechnique Fédérale de Lausanne
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2013
competitive advantage that is created (Zander &
Kogut, 1995). In fairness, inimitability may not be
critical in all environments. Some industries
move so quickly that imitation is not as much of
a concern (Pacheco-De-Almeida, 2010). Perhaps
it is these environments where crowdsourcing is
more generally appropriate in the manner dis-
cussed in Afuah and Tucci’s article.
Finally, I suggest that crowdsourcing research
be infused with a more overarching approach to
organizational action. One approach might be
the awareness, motivation, and capability per-
spective (AMCP) outlined by Chen and col-
leagues (Chen, 1996; Chen & Miller, 1994; Chen,
Su, & Tsai, 2007). The AMCP states that a firm
will attack and retaliate based on how aware it
is of the situation, how motivated it is to do
something about the situation, and how capable
it is at successfully engaging in the action
called for by the situation. Regarding using
crowdsourcing for distant search problem solv-
ing, the AMCP might suggest that the aware-
ness issue is adequately addressed by Afuah
and Tucci but the motivation and capability as-
pects need much more attention. The motivation
and capability issues, for instance, need to in-
clude the desire to gain and maintain a compet-
itive advantage as a primary element. At this
point Afuah and Tucci’s discussion of crowd-
sourcing is lacking in this important area.
REFERENCES
Afuah, A., & Tucci, C. L. 2012. Crowdsourcing as a solution to
distant search. Academy of Management Review, 37:
355–375.
Almirall, E., & Casadesus-Masanell, R. 2010. Open versus
closed innovation: A model of discovery and divergence.
Academy of Management Review, 35: 27– 47.
Chen, M. 1996. Competitor analysis and interfirm rivalry:
Toward a theoretical integration. Academy of Manage-
ment Review, 21: 100 –134.
Chen, M., & Miller, D. 1994. Competitive attack, retaliation,
and performance: An expectancy-valence framework.
Strategic Management Journal, 15: 85–102.
Chen, M., Su, K., & Tsai, W. 2007. Competitive tension: The
awareness-motivation-capability perspective. Academy
of Management Journal, 50: 101–118.
David, P. A., & Greenstein, S. 1990. The economics of com-
patibility standards: An introduction to recent research.
Economics of Innovation and New Technology, 1: 3– 41.
Jeppesen, L. B., & Lakhani, K. R. 2010. Marginality and prob-
lem-solving effectiveness in broadcast search. Organi-
zation Science, 21: 1016 –1033.
Dialogue 457
Lepak, D. P., Smith, K. G., & Taylor, M. S. 2007. Value creation
and value capture: A multilevel perspective. Academy
of Management Review, 32: 180 –194.
Lerner, J., & Tirole, J. 2002. Some simple economics of open
source. Journal of Industrial Economics, 50: 197–234.
Pacheco-De-Almeida, G. 2010. Erosion, time compression,
and self-displacement of leaders in hypercompetitive
environments. Strategic Management Journal, 31: 1498 –
1526.
Reed, R., & DeFillippi, R. J. 1990. Causal ambiguity, barriers
to imitation, and sustainable competitive advantage.
Academy of Management Review, 15: 88 –102.
West, J. 2003. How open is open enough? Melding proprietary
and open source platform strategies. Research Policy,
32: 1259 –1285.
Zander, U., & Kogut, B. 1995. Knowledge and the speed of the
transfer and imitation of organizational capabilities: An
empirical test. Organization Science, 6: 76 –92.
James Bloodgood (jblood@ksu.edu)
Kansas State University
http://dx.doi.org/10.5465/amr.2012.0318
● ● ●
Value Capture and Crowdsourcing
We are delighted by the opportunity to re-
spond to Bloodgood’s comments about our re-
search article, “Crowdsourcing As a Solution to
Distant Search” (Afuah & Tucci, 2012). Bloodgood
argues that because of the nature of crowd-
sourcing, value capture should have played a
larger role in our theorizing than it did. While
interesting and important, we consider this line
of thinking slightly tangential to our original
intent. Since our motivation for writing the arti-
cle is relevant to our response, we start with that
motivation. We then address the premise that
value capture is the most important factor in
theorizing about crowdsourcing. Finally, we ad-
dress the principal comments about whether our
model adequately accounts for the value cap-
ture “disadvantages” of crowdsourcing.
MOTIVATION AND GOALS OF OUR
CROWDSOURCING ARTICLE
What motivated us to write the article? As
scholars whose research is deeply rooted in
value creation and capture through innovation,
we were fascinated by anecdotal examples of
firms that had used crowdsourcing to success-
458 Academy of Management Review
fully create and/or capture value. For example,
one of the cases we cited in our article was that
of Goldcorp of Canada, which had used crowd-
sourcing to boost its gold output from 53,000
ounces per year to 504,000 ounces per year while
lowering its cost from $360 an ounce to $59 an
ounce. Remarkable! Such moneymaking exam-
ples of crowdsourcing were a far cry from the
open source (free) software examples that, to
some, had exemplified crowdsourcing. Our ini-
tial goal was to theorize about why, how, and
when crowdsourcing contributes to the success
of organizations. However, we quickly realized
that since there had been little theorizing on
crowdsourcing itself, it would be better to give
up this all-encompassing approach and focus
on one thing. So we chose the question of when
a firm is likely to crowdsource a problem rather
than solve it internally or outsource it to a des-
ignated contractor—a fundamental strategy
question. That left out many interesting ques-
tions, including a more detailed look at the role
of value capture during crowdsourcing (al-
though, as discussed below, we embedded ele-
ments of value capture in many of our
arguments).
PREMISE FOR THE NEED TO INCLUDE
VALUE CAPTURE
Before addressing Bloodgood’s central value
capture comments, we would like to point out
two differences between his underlying premise
and our own research findings and observa-
tions. First, in his introductory paragraph he as-
serts that “top managers of firms are not tasked
with solving problems; their goal is to make
money in a legal manner.” In our innovation
research we found that many top managers of
organizations with valuable, difficult-to-imitate
complementary assets— brand, distribution
channels, complementary technologies, shelf
space, marketing, manufacturing, and so on—
that can be used to capture value from innova-
tion (Teece, 1986) often see themselves and their
organizations as tasked with solving problems.
For example, former CEO Roy Vagelos (1991)
saw himself and Merck as tasked with solving
problems when the company developed a better
drug for reducing bad cholesterol levels in hu-
mans. That led to the discovery of statins, which
have considerably reduced heart attacks and
are believed to have saved many lives of at-risk
July
patients. Given that their competitors may have
similar valuable, difficult-to-imitate comple-
mentary assets, many managers and their firms
look to innovation (problem solving) as a driver
of competitive advantage. In those cases where
such managers cannot solve the problem effi-
ciently or effectively enough, they may need to
turn to crowdsourcing (Jeppesen &
Lakhani, 2010).
Second, crowdsourcing goes beyond open
source. Open source—as in open source soft-
ware—was about two types of openness: (1)
openness to the public so that anyone anywhere
could participate in solving a problem and (2)
openness in that nothing was proprietary. Open
source software activities are just one type of
crowdsourcing. In other types of crowdsourcing,
such as tournament-based crowdsourcing, there
is also openness in that anyone from anywhere
can self-select to solve problems. However, the
solution, unlike in open source software, can be
proprietary, and the winner may be paid a prize.
When InnoCentive hands over a solution from
solvers to a seeker, it usually also hands over
property rights to the seeker, making the solu-
tion proprietary (Jeppesen & Lakhani, 2010). Of
course, in crowdsourcing a problem, a seeker
risks giving its competitors information about
its competitive moves, reducing its ability to
capture value—a problem that intermediaries
such as InnoCentive have dealt with by keeping
the identities of seekers and solvers secret and
by disguising problems. Furthermore, solving a
problem internally does not guarantee inimita-
bility since there are other ways through which
knowledge can leak, such as employee mobility
and product reverse engineering.
THE SIGNIFICANCE OF VALUE CAPTURE
DURING CROWDSOURCING
Bloodgood’s primary criticism of our article is
that our arguments were not rooted enough in
value capture. Was value capture fundamental
to our crowdsourcing arguments? Yes it was,
although not as much as we would have liked,
given our focus. To see how, recall that a firm
captures value when the price it receives for the
benefits perceived by customers exceeds the
cost of providing the benefits (Lepak, Smith, &
Taylor, 2007). Thus, performing activities that
lead to better benefits, thereby raising the pros-
pects of obtaining higher prices, is likely to in-
2013 Dialogue
crease value capture, ceteris paribus. So is per-
forming activities that lower costs. These drivers
of value capture were so fundamental to our
arguments that the choice of which approach to
solve a problem— crowdsourcing, internal solu-
tions, or designated contracting—was based on
the expected value (benefits to customers) of the
solution and/or cost of offering the benefits.
Thus, some elements of value capture were fun-
damental to many of our arguments. However,
given the focus of the question that we chose to
answer and the need to keep our arguments
tractable, we did not explore as many aspects of
value capture as we would have liked. For ex-
ample, we did not go into the disadvantages of
crowdsourcing that potentially could result in
“holdup” that might increase transaction costs
and/or lower the likelihood of finding a high-
value solution through crowdsourcing relative
to the alternatives of internal problem solving or
designated contracting. For example, in tourna-
ment-based crowdsourcing the winner of a tour-
nament may refuse to turn over the underlying
intellectual property rights to a solution, per-
haps putting the seeker in a bad position.
Then there is the imitability problem that
Bloodgood refers to. If crowdsourcing is collab-
oration based and the solution is free or open,
any firm can have it, making appropriability of
the value from the solution more challenging. If
crowdsourcing is tournament based, competi-
tors can use the same crowds to get similar
problems solved, thereby imitating the focal
firm. That could also potentially reduce value
capture. In both cases firms with valuable, dif-
ficult-to-imitate complementary assets have a
better chance of making money than others
(Teece, 1986). In the examples we presented in
our article, Goldcorp owned the land with the
gold whose location crowdsourcing helped the
firm pinpoint, and Netflix controlled the physi-
cal distribution of DVDs and the data on the
network of users from whose behavior the mov-
ie-recommendation algorithm was derived.
Many firms also pursue a so-called run strat-
egy in which they innovate, make money as
early movers, and move on to their next innova-
tion before competitors imitate their older inno-
vations (Afuah & Tucci, 2002). Firms that pursue
such a strategy can use crowdsourcing since
they do not fear imitation as much as firms
whose competitive advantage depends on so-
called block strategies.
459
Finally, as is often the case with strategy ap-
proaches—such as the resource-based view,
product-market positioning, or transaction cost
economics—that explore value capture, we
did not consider pricing. Pricing is a critical part
of value capture that future scholars of crowd-
sourcing may want to pursue.
Bloodgood’s secondary concern about our ar-
ticle is that crowdsourcing research should be
part of “a more overarching approach to organi-
zational action,” such as the awareness, motiva-
tion, and capability perspective (e.g., Chen &
Miller, 1994). While this view is interesting, be-
cause of space constraints, we leave this more
tangential issue for future research.
CONCLUSION
From a theory point of view, there is still much
that needs to be done as far as theorizing about
crowdsourcing is concerned. In our article we
explored only one question: When might crowd-
sourcing be a better mechanism for solving
problems than the alternatives of either solving
them internally or designating an exclusive con-
tractor to solve them? Our exploration of the
question was rooted in two key drivers of value
capture—the value created and cost. However,
more comprehensive theorizing that focuses on
value capture, incorporating some of the issues
raised by Bloodgood, would be very useful. Ad-
ditionally, many other questions that we raised
in our article have not yet been explored. There
is plenty of room to add value to this very timely
subject.
REFERENCES
Afuah, A., & Tucci, C. L. 2002. Internet business models and
strategies. New York: McGraw-Hill.
Afuah, A., & Tucci, C. L. 2012. Crowdsourcing as a solution to
distant search. Academy of Management Review, 37:
355–375.
Chen, M., & Miller, D. 1994. Competitive attack, retaliation,
and performance: An expectancy valence framework.
Strategic Management Journal, 15: 85–102.
Jeppesen, L. B., & Lakhani, K. R. 2010. Marginality and prob-
lem-solving effectiveness in broadcast search. Organi-
zation Science, 21: 1016 –1033.
Lepak, D. P., Smith, K. G., & Taylor, M. S. 2007. Value creation
and value capture: A multilevel perspective. Academy
of Management Review, 32: 180 –194.
 460 Academy of Management Review
Teece, D. J. 1986. Profiting from technological innovation:
Implications for integration, collaboration, licensing
and public policy. Research Policy, 15: 285–305.
Vagelos, P. 1991. Are prescription drug prices high? Science,
252: 1080 –1084.
Allan Afuah (afuah@umich.edu)
University of Michigan
Christopher L. Tucci (christopher.tucci@epfl.ch)
École Polytechnique Fédérale
de Lausanne (EPFL)
http://dx.doi.org/10.5465/amr.2012.0423
● ● ● ognizes the need for a more, not less, compre-
Studying the Origins of Social
Entrepreneurship: Compassion and
the Role of Embedded Agency
Social entrepreneurship—the process of em-
ploying market-based methods to solve social
problems— continues to grow in popularity but
remains poorly understood. Researchers have
justifiably expressed a growing desire to leave
behind definitional debates regarding social
entrepreneurship and instead focus on its ante-
cedents and consequences. Arend’s (2013) re-
sponse to our article (Miller, Grimes, McMullen,
& Vogus, 2012) furthers this discussion by sug-
gesting that our focus on the motivational ori-
gins of social entrepreneurship is misplaced. He
outlines two major critiques: (1) compassion is
an inappropriate starting point for studying the
origins of social entrepreneurship, and (2) social
entrepreneurship research should instead focus
on “how the social entrepreneur-opportunity
nexus evolves” (2013: 4).
We address both critiques by highlighting the
fact that the social entrepreneur in our model is
an embedded agent (Holm, 1995; Seo & Creed,
2002). While societal forces may shape the role
of social entrepreneur and the scripts associ-
ated with social entrepreneurship, our model
recognizes that individuals must be motivated
to assume that role. In other words, the process
associated with social entrepreneurship is em-
bedded in a matrix of institutions that provides
the opportunity for such a process while the
individual is, in effect, a configuration of moti-
We thank Roy Suddaby for his editorial feedback.
View publication stats
July
vations, cognitions, and capital that make up
the entrepreneurial agency required to take part
in the process. Among the motivations is com-
passion, which has received considerable atten-
tion from social entrepreneurship researchers
(e.g., see Dees, 2007). Building on prior theory,
our recent work (Miller et al., 2012) specifies the
complex set of mechanisms through which com-
passion encourages the agency required to en-
gage in social entrepreneurship and the condi-
tions that channel this agency toward social
entrepreneurship. In clarifying our approach,
we offer an agenda for future research that rec-
hensive approach essential to understanding a
phenomenon as complex as social entrepre-
neurship. As a result, the proposed path is more
consistent with the moral of the elephant and
blind men parable often used by critics (Gartner,
2001), as well as advocates (Arend, 2013), of the
nexus approach to studying entrepreneurship.
DOES COMPASSION MATTER TO
SOCIAL ENTREPRENEURSHIP?
Part of what animates Arend’s critique and
much debate in the social entrepreneurship lit-
erature is the desire to articulate what makes
social entrepreneurship distinct from other
forms of organizing, as well as to question the
role of compassion in motivating it (Leadbeater,
1997; Peredo & McLean, 2006). We agree that
entrepreneurship and social entrepreneurship
share many similarities. However, the latter’s
emphasis on social mission (e.g., eliminating
poverty) alongside market-based organizing
and the embrace of a distinctive identity (i.e.,
social venture as a hybrid organization with
multiple bottom lines) separates them from
those focused primarily on maximizing share-
holder value. As a result of these distinctions,
the burgeoning literature on social entrepre-
neurship consistently points to the theoretical
importance of founder motivations, especially
compassion (e.g., Mair & Marti, 2006; Shaw &
Carter, 2007). In our article we argued that com-
passion upends typical evaluation criteria by
making it more other focused as well as actively
distorting one’s perceived efficacy and commit-
ment to creating social value. In other words,
compassion creates a distinct motivated reason-
ing process that complements traditional theo-
ries of entrepreneurship. We do not, however,