1 The “augmented market” mixing energy, transports and digitals Richard LE GOFF [email protected] Jonathan BAINEE [email protected].

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The “augmented market” mixing energy, transports and digitals

Richard LE [email protected]

Jonathan [email protected]

Forum Innovation VI1-3 Octobre 2014

Crise, innovation et transitionUniversité de Paris Ouest, Nanterre

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Layout :

-> 1. Understanding -> 1. Understanding the concept of « augmented market » ?the concept of « augmented market » ?

-> 2. Situating -> 2. Situating the concept of « augmented market »the concept of « augmented market »

-> 3. Measuring -> 3. Measuring the « augmented market »the « augmented market »

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Understanding the concept of augmented market

-> Few stylized facts :-> Few stylized facts :

-> Intra-sectoral « decompartmentalization » of the levels of value chains;-> Intra-sectoral « decompartmentalization » of the levels of value chains;

-> Troubling strategies of firms :-> Troubling strategies of firms : YesterdayYesterday VS nowadaysVS nowadays

96% - Roads96% - Roads

30% - Energy/transports30% - Energy/transports

90% - Telecoms90% - Telecoms

43% - Media43% - Media

2010 - Produce & 2010 - Produce & provide clean energy provide clean energy

Patents EV charge pointsPatents EV charge points

2010 - Identify & list 2010 - Identify & list EV charge pointsEV charge points

-> Horizontal decompartimentalization between digital-energy-transports sectors;-> Horizontal decompartimentalization between digital-energy-transports sectors;

1.1. A new strategy compared to integration & vertical quasi-A new strategy compared to integration & vertical quasi-integration that usually occur within these industriesintegration that usually occur within these industries

…

2.2. A new paradigm compared to focusing to the core business A new paradigm compared to focusing to the core business

An An « augmented « augmented

market » might market » might be seen as…be seen as…

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Understanding the concept of augmented market

… … through the networking of two or more autonomous markets (by their structures through the networking of two or more autonomous markets (by their structures and stakeholders)…and stakeholders)…

… … pooling – usually or not - a same physical or intangible basis…pooling – usually or not - a same physical or intangible basis…

… … at distinct levels of their proper value chains ;at distinct levels of their proper value chains ;

Organic ExternalHorizontal

Vertical-> Growth type-> Growth type -> Integration type-> Integration type

-> A definition :-> A definition :

-> Especially in the field of the digital, energy & transports-> Especially in the field of the digital, energy & transports

An « augmented market » is a structure of competition resulting from a strategy An « augmented market » is a structure of competition resulting from a strategy aiming at the creation of a market …aiming at the creation of a market …

SupplySupply DemandDemand

-> Infrastructure, information, knowledge-> Infrastructure, information, knowledge

1.1. Subadditivity of production functionsSubadditivity of production functions

2.2. Presence of (indirect) network effects, since the utility of the Presence of (indirect) network effects, since the utility of the « augmented product » is given be the number of users at « augmented product » is given be the number of users at

each side of the marketeach side of the market

Two main Two main properties of properties of

an augmented an augmented market »market »

n, Q : C(Q) ≤ nC(Q/n)

Α Α

Situating the concept of augmented market

IndustrialIndustrial convergence convergence (Zhou, 2003)(Zhou, 2003)

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-> An « augmented market » differs from :-> An « augmented market » differs from :

A “multi-sided market” (Weyl, 2010)A “multi-sided market” (Weyl, 2010)

= The value of a product is positively correlated with the = The value of a product is positively correlated with the amount of an other good from a different industry, which amount of an other good from a different industry, which forms the other side of the same market forms the other side of the same market (Wauthy, 2008).(Wauthy, 2008).

-> Preexisting & autonomous markets-> Preexisting & autonomous markets -> Same infrastructural basis-> Same infrastructural basis

A bundle (Moati & ali., 2006)A bundle (Moati & ali., 2006)

= Commercial offer articulating goods & services that have their = Commercial offer articulating goods & services that have their own market but contribute to an homogeneous functionality.own market but contribute to an homogeneous functionality.

-> Same infrastructural basis-> Same infrastructural basis-> Heterogeneous functionalities-> Heterogeneous functionalities

= Industrial integration between 2 or more industries= Industrial integration between 2 or more industries

……as well as « conglomerate », « vertical/horizontal integration or quasi-integration…as well as « conglomerate », « vertical/horizontal integration or quasi-integration…

-> A variation (not included in Pennings & Puranam (2001))-> A variation (not included in Pennings & Puranam (2001))

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Measuring the concept of augmented market

Identifying Identifying firms boundariesfirms boundaries dynamically dynamically can be done by understanding “corporate can be done by understanding “corporate coherence”, thanks to combinatorial statistics on activity portfolio of diversified coherence”, thanks to combinatorial statistics on activity portfolio of diversified firms (Teece & alii, 1994) :firms (Teece & alii, 1994) :

-> 3. Statistical identification :-> 3. Statistical identification :

The aim will be to identify inter-industrial relatedness through the analyse of inter-The aim will be to identify inter-industrial relatedness through the analyse of inter-relations between activities within firms, considering :relations between activities within firms, considering :

-> The number of workers (Teece & alii., 1994),-> The number of workers (Teece & alii., 1994),

-> Sales revenue (Bryce & Winter, 2009),-> Sales revenue (Bryce & Winter, 2009),

After obtaining a “After obtaining a “coherence degreecoherence degree” and “outliers”, we should explain & describe ” and “outliers”, we should explain & describe the basic logic of the augmentation of the market…the basic logic of the augmentation of the market…

-> Existing method : resource-based approach (Robins & Wiersema, 1995)-> Existing method : resource-based approach (Robins & Wiersema, 1995)

-> Proposition : functionnal approach (-> Proposition : functionnal approach (in the field of Gallouj & Weinstein, 1997in the field of Gallouj & Weinstein, 1997))

Bibliography (abstract)

- - Bainée J. & Le Goff R. (2012)Bainée J. & Le Goff R. (2012), « When territory tackles with system good – The case of the emergence , « When territory tackles with system good – The case of the emergence of an Electric Vehicle industry in California », of an Electric Vehicle industry in California », Revue d’Economie Régionale et UrbaineRevue d’Economie Régionale et Urbaine, n°3, pp.303-, n°3, pp.303-326326°;°;

- - Bryce D. & Winter S. (2009)Bryce D. & Winter S. (2009), «, « A General Interindustry Relatedness Index », Management ScienceManagement Science, , Vol.55, n°9, pp.1570-1585Vol.55, n°9, pp.1570-1585°;°;

- - Gallouj F. & Weinstein O. (1997)Gallouj F. & Weinstein O. (1997), « Innovation in services », , « Innovation in services », Research PolicyResearch Policy, n°26, pp.537-556, n°26, pp.537-556°;°;

- - Moati P., Ranvier M. & Sury R. (2006)Moati P., Ranvier M. & Sury R. (2006), , Des bouquets pour répondre globalement aux besoins des Des bouquets pour répondre globalement aux besoins des clients – éléments pour l’analyse économique d’une nouvelle forme d’organisation des marché dans le clients – éléments pour l’analyse économique d’une nouvelle forme d’organisation des marché dans le régime de croissance post-fordienrégime de croissance post-fordien, Cahier de recherche du CREDOC, n°230, 138 pages, Cahier de recherche du CREDOC, n°230, 138 pages°;°;

- - Robins J. & Wiersema M. (1995)Robins J. & Wiersema M. (1995), «, « A resource-based approach to the multibusiness firm: Empirical analysis of portfolio interrelationships and corporate financial performance », Strategic Management Strategic Management JournalJournal, Vol.16, n°4, pp.277-299, Vol.16, n°4, pp.277-299°;°;

- - Teece D., Rumelt R., Dosi G. & Winter S. (1994)Teece D., Rumelt R., Dosi G. & Winter S. (1994), « Understanding corporate coherence – theory and , « Understanding corporate coherence – theory and evidence », evidence », Journal of Economic Behavior and OrganizationJournal of Economic Behavior and Organization, n°23, pp.1-30, n°23, pp.1-30°;°;

- - Wauthy X-Y. (2008)Wauthy X-Y. (2008), « Concurrence et régulation sur les marchés de plate-forme : une introduction », , « Concurrence et régulation sur les marchés de plate-forme : une introduction », Reflets et perspectives de la vie économiqueReflets et perspectives de la vie économique, vol.47, n°1, pp.39–54°;, vol.47, n°1, pp.39–54°;

- - Weyl G. (2010)Weyl G. (2010), « A Price Theory of Multi-sided Platforms », , « A Price Theory of Multi-sided Platforms », American Economic ReviewAmerican Economic Review, vol.100, n°4, , vol.100, n°4, pp.1642–1672°;pp.1642–1672°;

- - Zhou Z-H. (2003)Zhou Z-H. (2003), « Industry convergence : historical symbol of industry innovation – analysis on , « Industry convergence : historical symbol of industry innovation – analysis on case of convergence of telecom, broadcasting and publishing », case of convergence of telecom, broadcasting and publishing », Industry EconomyIndustry Economy, n°1, pp.27-42, n°1, pp.27-42°;°;

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Thank you for your attention…and your

questions !