Tight versus Loose Organizational Coupling within Inter-Firm Networks in the Enterprise Software Industry - The Perspective of Complementors

Facilitated by new standards and middleware technologies, enterprise application software is increasingly characterized by a high degree of modularity. On an organizational level, this is reflected by the goal of dominant system vendors (hubs) to form loosely-coupled hub-and-spoke networks with smaller niche players (spokes) that complement their solutions. This paper aims at explaining differences regarding the extent to which spokes strive for loosely-coupled partnerships as opposed to closely-tied relationships with a particular hub. The type of coupling is indicated by the level of hub-specific investments and the application of informal governance mechanisms. Following existing theory, the synergistic specificity between the partners’ technological, commercial, and social capital is suggested to determine the aspired type of coupling. Moreover, it is argued that a tighter coupling leads to an increased threat of opportunism. However, instead of loosening the partnership, spokes tie themselves even closer to the hub.