Hyperspecialization and Hyperscaling: A Resource-Based Theory of the Digital Firm
55 Pages Posted: 22 Sep 2021
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Hyperspecialization and Hyperscaling: A Resource-based Theory of the Digital Firm
Date Written: August 1, 2021
Abstract
Digital firms tend to be both narrow in their vertical scope and large in their scale. We explain this phenomenon through a theory about how attributes of firms’ resource bundles impact their scale and specialization. We posit that highly scalable resource bundles entail significant opportunity costs of integration (versus outsourcing), which simultaneously drive “hyperspecialization” and “hyperscaling” in digital firms. Using descriptive theory and a formal model, we develop several propositions that align with observed features of digital businesses. We offer a parsimonious modeling framework for resource-based theorizing about highly scalable digital firms, shed light on the phenomenon of digital scaling, and provide insights into the far-reaching ways that technology-enabled resources are reshaping firms in the digital economy.
Keywords: digital firms, firm resources, opportunity costs, scalability, scale and scope
JEL Classification: L22, L23, L25
Suggested Citation: Suggested Citation