Transparency design and generative governance of innovation in digital ecosystems

A key problem of governance of innovation in digital platform-based ecosystems relates to evolvability. Due to abundance of data about the complementary innovators¿ behavior and new analytics technologies, ecosystem orchestrators are afforded to govern innovation in a more indirect manner. They are enabled to collect, analyze, and publish market-related information within the ecosystem, and thus, to shape the actors¿ innovation activities through visibility of this information. In this paper, we introduce transparency as an important generative governance mechanism for innovation in digital ecosystems and argue that it creates an innate capability for the ecosystem to evolve. We frame digital ecosystems as complex adaptive systems, in which individual ecosystem actors autonomously innovate, and advise the NK fitness landscape to develop a new computational model that explains how transparency enables ecosystem to evolve towards a higher performance through two paradoxical innovation strategies, namely path-enhancement and path-creation. In our model we include three core principles: (1) The complexity of digital innovation 2) the individual- level path-creation, and (3) the accuracy and dynamics of performance transparency in order to `trigger¿ path-creation through reference values. Through large-scale computational experiments we furnish novel theoretical and counterintuitive results. We found that transparency is a critical self- regulatory mechanism for the ecosystem's capability to evolve and is influenced by transparency design. A higher accuracy of the reference value positively triggers the adaption of the ecosystem towards a higher performance level and is positively moderated by the level of individual path- creation. However, a dynamic generation and dissemination of reference values has its limits, in particular, if innovation decisions are complex. Surprisingly, there is a transition point at which the positive effect of dynamic and accurate performance transparency turns into a negative effect through negative reinforcement of path-creation and agility. Our analysis leads to new testable propositions about the complex causal pathways by which platform capabilities and transparency design affect evolvability of digital ecosystems, and has implications for ecosystem sustainability.