Abstract
Digital innovation has revolutionized organizational processes and outcomes in several industries. Previous studies emphasize the transformational nature of digital innovation in redefining the nature of competition and exposing incumbent industry players to a dire fate. We focus on the retail sector, where platform sponsors leverage digital innovation to intermediate the exchanges between buyers and sellers and orchestrate complementary innovations to make the platform ecosystem more valuable to members. We investigate whether digital innovation in retail platform ecosystem renders established competencies of traditional intermediaries obsolete through a case study of Alibaba Lingshoutong, a business-to-business digital sourcing and distribution platform. The analysis shows the oppositional nature of digital innovation built from a transaction cost rationality and existing practices based upon social capital. This study reveals the incremental nature of digital innovation, a dimension which receives little attention thus far. Based on some preliminary empirical findings and conceptual rationale, we developed three propositions.