Abstract
Ecosystem business models have gathered significant attention in research and business literature. Many of the highest valued companies have embraced this model expanding beyond their initial core businesses, such as a telco venturing into banking. If done right, implementation of an ecosystem model seems promising from the shareholder perspective with ecosystems enjoying higher valuation multiples than their conventional peers. However, enough controversies surround ecosystems. One of them is agency conflict between shareholders and management. Ecosystems by design imply a higher degree of transparency in the organization which should mitigate the conflict. However, one could argue that not all shareholders appreciate it. In this paper using a sample of 1983 US-traded firms we provide one of the first empirical evidences of relationship between implementation of ecosystem business model and agency conflict. We show that while ecosystems have a significantly higher level of shareholder activity, this activity is not accompanied by shareholder hostility. Thus, it can be argued that ceteris paribus, ecosystems have a lower level of agency conflict. We also show that to achieve the result firms have to actually implement the business model and not just talk about it. Ecosystem business models have gathered significant attention in research and business literature. Many of the highest valued companies have embraced this model expanding beyond their initial core businesses, such as a telco venturing into banking. If done right, implementation of an ecosystem model seems promising from the shareholder perspective with ecosystems enjoying higher valuation multiples than their conventional peers. However, enough controversies surround ecosystems. One of them is agency conflict between shareholders and management. Ecosystems by design imply a higher degree of transparency in the organization which should mitigate the conflict. However, one could argue that not all shareholders appreciate it. In this paper using a sample of 1983 US-traded firms we provide one of the first empirical evidences of relationship between implementation of ecosystem business model and agency conflict. We show that while ecosystems have a significantly higher level of shareholder activity, this activity is not accompanied by shareholder hostility. Thus, it can be argued that ceteris paribus, ecosystems have a lower level of agency conflict. We also show that to achieve the result firms have to actually implement the business model and not just talk about it.