You are on page 1of 38


Melissa Archpru Akaka, Stephen L. Vargo and Robert F. Lusch

Purpose The purpose of this essay is to explore further the concept of value cocreation from a service-ecosystems view, by considering the importance of networks and the conguration of relationships and resources in markets. Methodology/approach We use a conceptual approach to extend a service-dominant (S-D) logic, ecosystems view of value cocreation by drawing on the literature regarding networks in marketing and related research. Findings A service-ecosystems approach to cocreating value-in-context is proposed, which points toward networks as mediating factors in value cocreation because they inuence the ability to access, adapt, and integrate resources by establishing exchange relationships and shaping the social contexts through which value is experienced.

Special Issue Toward a Better Understanding of the Role of Value in Markets and Marketing Review of Marketing Research, Volume 9, 1350 Copyright r 2012 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1548-6435/doi:10.1108/S1548-6435(2012)0000009006




Research implications This research suggests that value cocreation is a complex and multidimensional process that is best studied in the context of dynamic networks or ecosystems of service exchange. Practical implications This research suggests that networks mediate value cocreation, and thus, rms should consider the congurations of relationships and resources to develop more compelling value propositions. Social implications This research draws on the idea that exchange relationships are embedded within society and suggests that processes of value cocreation not only draw on but also contribute to the social contexts that frame market exchange. Originality/value of essay This research extends the value cocreation and S-D logic literature by exploring the role of networks in service ecosystems. In this framework, networks are mediators of value cocreation because they enable access to resources and help to (re)shape social contexts through which value is derived. Keywords: Value cocreation; service-dominant logic; S-D logic; service ecosystems; networks

It is becoming increasingly clear that conventional conceptualizations of dyadic and unidirectional relationships in markets and marketing are inadequate for studying the dynamics, processes, and outcomes of collaboratively created value. Contrary to traditional models of value creation, which suggest that value is created by rms (through production and distribution) and, subsequently, used up or destroyed by customers (through consumption) (Normann, 2001), the literature regarding value cocreation suggests that customers are always active participants in the creation of value. This view is based on the idea that value is ultimately derived and determined through an experience created in conjunction with or use of an offering or value proposition, in a particular context (Prahalad & Ramaswamy, 2004; Vargo & Lusch, 2004, 2008; Vargo, Maglio, & Akaka, 2008). Moreover, recent studies emphasize the participation and perspectives of multiple actors, including rms, customers, and other stakeholders in value cocreation (Akaka & Chandler, 2011;

An Exploration of Networks in Value Cocreation


Vargo & Lusch, 2011a). The central aim of this essay is to contribute to a deeper understanding of how value is cocreated through the interaction of multiple stakeholders in markets. To do this, we discuss a servicedominant (S-D) logic, ecosystems view on value cocreation, and draw on the literature on networks in marketing, and related elds, to develop a deeper understanding of how value is collaboratively created (cocreated) in markets and society. At the forefront of the movement toward thinking about collaboratively and mutually created value, Vargo and Lusch (2004, 2008) argue that customers always contribute to the cocreation of value, through use. Thus, a rm can only propose value and participate in its realization; it cannot create value on its own. This view on value cocreation is a central argument in the evolving S-D logic of marketing, which is grounded in the premise that service the application of resources for the benet of others is the basis of exchange. Most recently, Vargo and Lusch (2011a) propose a service-ecosystems approach to thinking about how value is cocreated through dynamic and interconnected networks of interaction and resource integration. More specically, service ecosystems are relatively selfcontained self-adjusting systems of resource integrating actors connected by shared institutional logics and mutual value creation through service exchange (Vargo & Lusch, 2011b). This view reconsiders the nature of relationships and resources in markets. It broadens the view of value cocreation beyond the rmcustomer dyad and draws attention toward the social contexts (i.e., institutions) that frame value cocreation and exchange (Chandler & Vargo, 2011). This service-ecosystems approach to value cocreation includes dynamic webs of actors, their relationships and their structural positions, which integrate and exchange resources to cocreate value for themselves and for others (Akaka & Chandler, 2010; Vargo & Lusch, 2011a). However, grounded in S-D logic, this view focuses on the integration of operant resources those that are capable of acting on other resources to create benet and the cocreation of value through complex, dynamic congurations of mutually benecial exchange relationships among multiple stakeholders. Furthermore, S-D logic focuses on value that is created through the use of a value proposition, in a particular context value-incontext. Thus, a service-ecosystems view of value cocreation not only centers on value that is derived and determined in a particular context, but also sheds light on the collaborative formation of the context, itself (Chandler & Vargo, 2011). In this dynamic view, value cocreation is mediated by networks of interconnected relationships, as well as resources



(Lusch, Vargo, & Tanniru, 2010; Vargo & Lusch, 2008), which constitute the context through which value is derived. Thus, a deeper understanding of the nature of networks can help to provide a stronger foundation for future studies on value cocreation, particularly from a service-ecosystems view. The study of networks has been identied as a theoretical framework for studying markets and marketing, as well as a complementary view for conceptualizing and measuring properties of service ecosystems (Chandler & Wieland, 2010; Lusch & Vargo, 2006a). Iacobucci (1996, p. xv) explains that, the goal of researchers working within the network paradigm is to understand structures of relationships. She argues, Much of marketing is relational. Networks are an excellent means of studying relational phenomena. [Therefore] networks are an excellent means of studying much of marketing. Gummesson (2006, p. 349) proposes that a grand theory of marketing can be based on networks and their universal capacity to mirror reality by allowing for complexity, context and dynamism. Importantly, Normann (2001) makes the connection between networks of relationships and value cocreation by suggesting that value constellations can be congured and recongured to mobilize resources and make them more accessible and adaptable increase density for customers. Thus, a closer look at the literature on networks in marketing and related streams helps to further the study of value cocreation by providing a means for measuring interconnected relationships, interaction, and inuence, among multiple actors in service ecosystems, particularly markets. This essay discusses an S-D logic, service-ecosystems view of value cocreation and integrates the literature regarding networks in markets and marketing to shed light on the nature of networks and how they contribute to value cocreation. We begin by discussing the concept of value cocreation and elaborate an S-D logic, ecosystems view to provide a framework for conceptualizing how value is created through dynamic and mutually benecial relationships in markets. We then explore the networked nature of relationships and resources in service ecosystems (e.g., markets), by drawing on the literature on networks in marketing and related areas. This review of network literature provides insight to the embedded nature of exchange relationships and the importance of network congurations in value cocreation. We then elaborate on how interaction in networks drives value cocreation and the formation service ecosystems. Based on this, we argue that networks are critical mediators for value cocreation because they enable actors to access, adapt, and integrate resources in order to create value for themselves, and for others. In this view, rms can develop more

An Exploration of Networks in Value Cocreation


compelling value propositions by (re)conguring relationships and resources and increasing systems density in experience networks (Prahalad & Ramaswamy, 2004). Finally, we discuss the implications and future research directions of this service-ecosystem, network-centric view on value cocreation.

Conventional models of value creation depict a rms production of an offering, which is embedded with value for a customer to consume. Such models limit the understanding of value creation to the rms production and operational activities and conceptualize value based on the output of the rm (e.g., Porter, 1985). Four major issues arise when observing complex processes of exchange within a rm-centered framework: (1) the process of value creation is centered on rm activities and taken out of context from the market and society, (2) the consideration of market relationships is limited to dyadic interactions and discrete exchange transactions, (3) models of exchange and value creation focus on the production and distribution of tangible, static resources, and (4) value is measured largely by price or value-in-exchange. These limitations to understanding value creation are becoming more and more evident. Increases in globalization and ubiquitous access to information draw attention toward the socioeconomic context and interdependent nature of exchange. These changes have revealed the need for a more comprehensive framework for studying value creation for all parties of exchange. Recently, there has been a pivotal shift in the understanding of value creation, from the dyadic exchange between a producer and a consumer, to an interactive process among various social and economic actors including rms, customers, and other stakeholders (e.g., Normann, 2001; Prahalad & Ramaswamy, 2004; Vargo & Lusch, 2004). A growing collection of literature in marketing and management discusses the creation of value that continues outside the functions of a rm and suggests that value is not created by a rms output; rather it is determined by customers through the process of use (Gro nroos, 1994). In this view, value is collaboratively created through the integration of resources (both tangible and intangible) and uniquely determined through customers experiences (Prahalad & Ramaswamy, 2004; Vargo & Lusch, 2004). Although the concept of value cocreation has been largely studied in the context of the rmcustomer dyad, Payne, Storbacka, and Frow (2008, p. 94) argue for



more attention to be paid toward the role of non-supplier partners and intermediaries in cocreation. When value cocreation is explored from an S-D logic view, distinctions between producers and consumers are blurred, and an emphasis on interaction and interdependent relationships emerges. The literature regarding S-D logic increasingly emphasizes the complexity and dynamics of value cocreation, especially in its recent discussions of service ecosystems (Vargo & Lusch, 2011a, 2011b). At the same time, research regarding the importance of network congurations in value cocreation also has recently emerged (Akaka & Chandler, 2010; Chandler & Vargo, 2011; Chandler & Wieland, 2010). This research suggests that the conguration of networks inuences value cocreation in service ecosystems because some actors have access to more resources than others (Chandler & Wieland, 2010), and networks of relationships contribute to the context through which value is derived (Akaka & Chandler, 2010; Chandler & Vargo, 2011). Thus, a deeper look at the literature regarding networks in marketing, and related streams, can further develop the understanding of value cocreation in markets and marketing from an S-D logic, service-ecosystems view. The sections below discuss a service-ecosystem view and draw on the literature on networks in marketing as they relate to the main components of value cocreation exchange, relationships, resources and value.

The study of value creation has been a central focus of marketing and related disciplines since the beginning of the 20th century. However, a recent shift in the logic of marketing, toward S-D logic, reconsiders conventional views of the processes and participants that contribute to value creation (Vargo & Lusch, 2004). Normann (2001) reinforces a service-centered approach to value creation and value-creating systems. He argues that service logic forces us to shift our attention from production to utilization, from product to process, from transaction to relationship. It enhances our sensitivity to the complexity of roles and actor systems. In this sense the service logic clearly frames a manufacturing logic rather than replaces it (2001, p. 98, emphasis in original). Recently, Vargo and Lusch (2011b) elaborate on a service-ecosystems approach to studying value cocreation in marketing. In their view, service ecosystems are self-regulating systems that are driven by individual efforts to integrate resources and cocreate value through the exchange of service. In

An Exploration of Networks in Value Cocreation


this perspective, value cocreation occurs through the integration of resources, mediated by reciprocal exchange encounters and shared institutions in complex systems of service-for-service exchange. Importantly, a service-ecosystems view emphasizes the importance of shared institutions (Vargo & Lusch, 2011a) the social norms or rules of the game (Williamson, 2000) that inuence and are inuenced by interaction and exchange among actors. This framework draws attention toward the consideration of (1) markets as service ecosystems, (2) relationships beyond exchange, (3) value cocreation through resource integration, and (4) the contextual nature of value. These are elaborated below.

(Eco)systems of Service Exchange The process of exchange appears increasingly complex as it is more closely examined through an S-D logic, ecosystems lens. S-D logic proposes that the fundamental driver of exchange, service, is masked by indirect exchange. Within a service-ecosystems view, what is fundamentally an exchange of service-for-service, becomes a complicated web when organizations, monetized exchange, and multidimensional interactions are included. Vargo and Lusch (2004, p. 8) explain, over time, exchange moved from one-toone trading of specialized skills to the indirect exchange of skills in vertical marketing systems and increasingly large, bureaucratic, hierarchical organizations. As organizations increased in size, specialization led to micro-specialization, which eliminated the majority of interaction between those providing service and those rendering it (Vargo & Lusch, 2004). From an S-D logic, ecosystems view, organizations, money and goods, as well as networks, are vehicles or media for exchange; with service remaining the fundamental basis of all exchange. Lusch and Vargo (2006b) recognize that there is a tendency to view organizations as entities in and of themselves without accounting for the employed individuals who generate and transfer knowledge internally and externally. The authors elaborate, macro systems, which undoubtedly should be studied in their own right come about or emerge from micro phenomena (p. 410). In this way, macro levels of society are composed of micro-level social and economic exchanges. Although marketing management has traditionally been studied under the perspective of the rm, the understanding of service-for-service exchange requires an approach that considers micro- and macro-, as well as meso or mid, levels of phenomena and can oscillate perspectives among them (Chandler & Vargo, 2011). This



approach centers on the interaction among multiple stakeholders at various levels of any given exchange system, and, thus, is highly relational. In this view, exchange encounters are nested within a host of networked relationships (Chandler & Wieland, 2010). Because of this, thus a broader view of relationships is required for understanding value cocreation in systems of service-for-service exchange.

Dynamic and Nested Relationships The traditional conceptualization of relationships in marketing focuses on the repeat patronage of customers and the continuity of their interactions with a particular rm over time (for detailed review of relationship marketing, see Vargo, 2009). However, this focus on customerrm exchange encounters neglects the variety of interactions that occur among other stakeholders that potentially inuence or are inuenced by any given exchange (Baldwin, 2007). With the rise of online social networks and the transparency of customer interactions, it is becoming increasingly clear that there is more to exchange than a single (or multiple) transaction(s). From a service-ecosystems perspective, the process of value cocreation continues through a nexus of ubiquitous exchanges, and the transfer and generation of knowledge through these interactions is innite (Vargo & Lusch, 2011a). In this view, discrete, money-for-goods exchange transactions only make up a small fraction of what is being exchanged throughout society. Vargo and Lusch (2011a) argue that, from an ecosystems view, transactions (discrete exchange encounters) can be seen as bounded relationships. That is transactions are bounded because they represent temporary moments (sometimes made tangible through goods) in intersecting value cocreation processes and relationships. Vargo (2009) draws on Baldwin (2007), who distinguishes between a transfer and a transaction to differentiate between two types of exchange. Baldwin (2007) states that transfers are necessary for human survival because no one person has access to all the resources he or she needs. However, she explains that transfers are not necessarily transactions because transactions must be standardized, counted, and compensated. Baldwin argues that transactions arise as thin crossing points between modules or clusters of multiple interactions. She explains that transactions across modules are driven by a multitude of transfers (of resources or interactions) within them. Thus, in order to gain a fuller understanding of value cocreation, the consideration of relationships or transfers that create and are

An Exploration of Networks in Value Cocreation


inuenced by transactions and the drivers of those relationships are needed. Ballantyne and Varey (2006, p. 336) elaborate on how S-D logic expands the scope of value cocreation by suggesting, the time logic of marketing exchange becomes open-ended, from pre-sale service interaction to post-sale value-in-use, with the prospect of continuing further as relationships evolve. In line with this view, Ramirez (1999, p. 51) discusses the neverending interaction and interconnected relationships in value cocreation and argues that there are no nal customers in this emerging framework. Thus, this ecosystems view of relationships suggests that value is cocreated through a combination of processes that include pre-purchase information gathering, the exchange encounter, and the use derived through the application of a value proposition and its integration with other resources and relationships as well.

Integration of Operant and Operand Resources The discussion of resources in S-D logic and service ecosystems identies two broad categories of resources that are integrated to create value: (1) operant resources those that are capable of acting on other resources to contribute to value creation and (2) operand resources those that require action taken upon them to be valuable (Constantin & Lusch, 1994; Vargo & Lusch, 2004). S-D logic emphasizes the primacy of operant resources, such as knowledge and skills, which moves the focus of exchange and value creation away from operand resources, such as goods and money. Within S-D logic, knowledge and skills are considered to be key resources for competitive advantage and when goods are involved, they are tools for the delivery and application of resources (Vargo, Lusch, & Morgan, 2006). However, Vargo, and Lusch (2004, p. 2) also argue that resources are not, they become. This means that in order for a potential resource to become a resource, it must contribute to the improvement or increased viability of a system (Vargo et al., 2008). In this way, value is inuenced by variety of internal and external factors, including, but not limited to, the ability to access other operant and operand resources. From an S-D logic view, markets are woven together through the integration of resources via exchange. Vargo et al. (2008, p. 149) argue that actors integrate their resources with those of others to improve their own circumstances (create value) as well as the circumstances of others. They elaborate, One way to acquire resources is through the exchange of a



systems applied operant resources (service) with those of other systems. We can consider individuals, groups, organizations, rms and governments to be service systems if they can take action, apply resources, and work with others in mutually benecial ways. In this way, individuals and groups of individuals interact and exchange resources in their efforts to create value for themselves and for others. Thus, the process of resource integration is continuous. This is because no one actor can access all the resources it needs, and once resources are integrated and value is created e.g., satisfaction arises the situation is temporary. Thus, value cocreation is a continuous process because resources become depleted and views on what is, and is not, valuable change over time. Lusch and Vargo (2006b, p. 14) suggest that what are often thought to be external (i.e., exogenous) and uncontrollable factors in markets, such as legal, social, technological, and even natural environments, have the potential to be resources if certain resistances can be overcome. In other words, when rms consider the applicability of their offerings within a variety of contexts, they can actually draw on environmental factors (e.g., social or political institutions) as resources to increase the potential value of their value propositions. In this way, resource integration not only draws on resources accessed through exchange among actors but also integrates those resources that are part of a broader social context. Moreover, a serviceecosystems view of value cocreation suggests that as actors cocreate value, they not only draw on, but also contribute to the social context through which value is derived (Chandler & Vargo, 2011).

Value-in-Context The S-D logic, ecosystems view suggests that there is no value until an offering is used experience and perception are essential to value determination (Vargo & Lusch 2006, p. 44). Vargo and Lusch (2006) argue that the study of value creation should be focused on value-in-use because a rms role in value creation is an intermediary part of the process, and customers are ultimately responsible for deriving and determining value through the application of a rms offering. They join other scholars (e.g., Alderson, 1957; Shostack, 1977) in arguing for a movement from the primacy of value-in-exchange toward the primacy of value-in-use. However, a service-ecosystems approach to value cocreation also emphasizes the importance of the context through which value is derived (Chandler & Vargo, 2011). In particular, Vargo et al. (2008, p. 150) propose the concept

An Exploration of Networks in Value Cocreation


of value-in-context to explicate the contextual nature of value-in-use and argue that the context of value creation is as important to the creation of value as the competences of the participating parties. They add, Resources such as time, weather and laws, which are often considered uncontrollable by individuals and organizations, are integrated, if not relied on in the value creation processes by all service systems (e.g., customers, rms, families, countries). It is important to note that by focusing on value-in-use, or value-incontext, S-D logic does not omit the necessity of value-in-exchange or the market price (Vargo et al., 2008). Vargo and Lusch (2006, p. 49) argue that value-in-exchange could not exist without the presence of value-incontext, but exchange is required for value creation once the resources needed cannot be attained naturally. The authors also acknowledge the importance of value-in-exchange with regard to nancial feedback to the rm. Vargo and Lusch (2006, p. 49) explain that when a rm sells its service (with or without a tangible good), it receives a monetary instrument (cash or the promise to pay). These monetary instruments are used to acquire other service (with or without tangible good) from suppliers, including employees. Although value-in-exchange is an important feedback mechanism for rms, the emphasis of an S-D logic view of value is on value-in-use, in context, or value-in-context. Chandler and Vargo (2011) elaborate the concept of value-in-context and shed light on how the interaction among various actors contributes to value cocreation as well as the contextualization or formation of the social context that frames exchange. The authors propose a multilevel approach for conceptualizing context, which is composed of micro, meso, and macro levels, as well as a meta layer that allows for oscillation among the other three levels of context. This view on value-in-context emphasizes the recursive nature of value cocreation in service ecosystems. In this view, as actors interact to cocreate value for themselves and for others, they not only contribute to individual levels of value, or an evaluation of an experience, but also contribute to the formation, or contextualization, of the social context through which value is being derived. This social context is composed of a variety of interconnected relationships (Chandler & Vargo, 2011) but also the social norms or institutions that guide interaction as well (Edvardsson, Tronvoll, & Gruber, 2011; Vargo & Lusch, 2011a, 2011b). S-D logic provides a complex and dynamic systems approach for value cocreation. In particular, this view on value-in-context emphasizes the importance of understanding the social context through which value is derived. The following sections discuss on the literature on networks in



marketing and related areas to elaborate how social contexts (composed of interconnected relationships and resources) frame exchange and how these contexts inuence and are inuenced by value cocreation, or processes by which value is collaboratively created.


A number of value cocreation studies focus on the relationship between a rm and its customers (Prahalad & Ramaswamy, 2004; Payne et al., 2008). However, an S-D logic, ecosystems approach emphasizes that value cocreation involves a multitude of actors, with various roles and resources (Akaka & Chandler, 2011). Lusch and Vargo (2006a) explain that the cocreation of value involves a rm and its customers, suppliers and other network partners. Moreover, S-D logics emphasis on the contextual nature of value (Chandler & Vargo, 2011; Vargo et al., 2008) underscores the importance of the social context that frames exchange and value cocreation. Based on this, it is clear that a customers ability to integrate knowledge and skills and cocreate value is dependent on existing internal competences as well as the integration of resources through a broader network of relationships. Thus, the value created through any exchange encounter depends on the relationships and resources beyond the rm customer dyad. Because a number of avenues of information (e.g., personal, market facing, and nonmarket facing) are often required for a customer to derive value from a rms value proposition (service rendered), a model of value cocreation must allow for studying complex and dynamic interaction among multiple actors with differing roles and responsibilities. Thus, the framework for conceptualizing service ecosystems must be exible enough to account for continuous movement and improvement as well as expansion for a wide variety of external variables included in value cocreation processes. Furthermore, the concept of value-in-context (as discussed above) suggests that the process of value cocreation not only draws on but also inuences the social contexts relationships, as well as norms and meanings through which value is derived (Edvardsson et al., 2011). In this way, a network (composed of interconnected relationships and resources) can be considered as a critical mediating variable in the cocreation of value at micro as well as meso and macro levels (Chandler & Vargo, 2011). Lusch and Vargo (2006a, p. 285) propose the integration of networkrelated research for examining value cocreation by suggesting that much

An Exploration of Networks in Value Cocreation


could be gained in the elaboration and extension of S-D logic from a more explicit connection to the interactivity and networking literature. Gummesson (2006, p. 342 emphasis in original) describes how the study of networks contributes to the understanding of relationships in value creation. He argues, When relationships embrace more than two people or organizations, complex patterns will emerge networks. We therefore also talk about networks of relationships. What happens between the parties in a relationship is called interaction. The following sections provide a discussion of networks in markets and the interaction that occurs within and among them. Although the literature regarding networks spans a variety of social science disciplines (e.g., see Wasserman & Faust, 1994), the aim here is to inform the understanding of value cocreation in markets and marketing. Thus, this discussion centers on the literature regarding networks in marketing to shed light on the nature of networks in service ecosystems and how they contribute to the cocreation of value as well as the formation of social contexts that frame exchange (Chandler & Vargo, 2011).

Multiple Actors in Networks Early studies regarding networks in marketing rst appeared during the 1970s in the work related to business-to-business (B2B) marketing and interorganizational theory (Chandler & Wieland, 2010; Gummesson, 2005). Gummesson (2005) describes how B2B marketing developed separately from business-to-consumer (B2C) marketing, creating two major categories of marketing. He says that one of the possible reasons that has been noted for this separation is that the B2B products are thought to be developed from the initiative of the buyer or in close buyerseller relationships. Ford and Hakansson (2005) argue that business interactions must be studied under a network paradigm because business relationships cannot be understood through the perspective of a single company. They say that business relationships are inherently interactive and the actions of a single company are largely based on its internal interpretations of past and present relationships. Business networks recognize that each actor is heterogeneous in terms of its resources, needs, and goals, and businesses cannot be categorized neatly into homogeneous groups such as customers, suppliers, competitors, manufacturers, or retailers. Additionally, in such an interactive environment, the process or ow of resources is not linear or controlled by any one actor. Although Gummesson (2006, p. 349) notes that the research regarding network theory in marketing originated in the B2B literature, he



also acknowledges the applicability of network theory for all of marketing by arguing that not only organizations live in networks, but also consumer citizens and employees. As mentioned, much of the existing research on networks in marketing and management comes from the B2B realm and focuses on the interaction among rms. In many cases, businesses are connected through outsourcing functions such as manufacturing and IT. Normann (2001, p. 107) furthers the discussion of B2B collaboration beyond outsourcing relationships and argues that networks of rms make up value constellations, which are linked through patterns that create innovative businesses and/or change the way value is created. Value constellations are not merely a reallocation of activities or outsourced functions of the rm; rather they are a coordinated group of activities and/or rms that construct an innovative, nontraditional output. In line with Normanns (2001) focus on value creation in constellations, business nets have been introduced as relationships designed to develop specic solutions to sometimes temporal, rather than long-term problems or operational activities (Moller & Svahn, 2006). Nets rely on knowledge sharing and value cocreation among rms, with the understanding that the end customer ultimately determines value. Notably, Moller and Svahn (2006, pp. 988989) emphasize the relationship of knowledge assimilation and competence within a net. They suggest that as value activities are essentially based on knowledge, the level of determination is also related to the level of codication of knowledge. The aspect of how well known the capabilities underlying the value activities are is related to how easily the underlying knowledge can be accessed and shared. This emphasis on the codication of knowledge suggests that through the process of transferring information throughout networks, the determination of what is and is not knowledge takes place. In other words, in this view, knowledge is created and recreated through network interactions, rather than merely distributed or disseminated. Focusing on individual customer competences in the discussion of value cocreation, Prahalad and Ramaswamy (2004) address customers needs to relate to others on the basis of common interests, needs, and experiences. In their work, customer communities enable consumers to communicate and share ideas and feelings and take part in social exchange. The authors explain that the power of customer communities stem from shared opinions and personal experiences that affect demand and reverse the traditional rm-to-customer ow of marketing communications. In this way, customers not only contribute to the value created for themselves but, through their

An Exploration of Networks in Value Cocreation


interactions, also create new meanings associated with rms value propositions. While these customer communities have always existed, the introduction of the Internet has drastically changed the shapes and span of these networks as well. Integrating business and customer networks, Gummesson (2006) offers a tentative grand theory of marketing called many-to-many marketing, which expands on characteristics of one-to-one marketing (Peppers, Rogers, & Dorf, 1999). It moves beyond the study of customer identication, differentiation, and interaction (Peppers et al., 1999) and reconsiders the dyadic relationship between a rm and a customer in the context of the wider market. Gummessons many-to-many theory considers various value-creating relationships among groups of businesses and individual consumers. Rather than focusing on business-to-business or business-toconsumer relationships, many-to-many marketing is said to encompass all B2B, B2C, and C2C relationships, and with Vargo and Lusch (2011a) recently advocating an A2A (actor-to-actor) perspective it would also include C2B and P2B (where P is public) and any other potential A2A roles. The expansive nature of network relationships reveals many different types of value-creating actors and relationships among them. Because the market connects a variety of interactions among different types of actors, the study of networks helps to identify levels of micro and macro interaction that are critical in inspecting different aspects of exchange. In addition, the general nature of networks enhances its applicability to a variety of contexts. According to Ward and Reingen (1996, p. 307), in networks, nodes may be people or concepts. Links may be social or logical. Thus, the examination of various network perspectives and alternative methods of interaction are useful in understanding different viewpoints and processes of value cocreation.

Embeddedness of Exchange Relationships Around the same time B2B scholars began to apply a network view to the study of industrial relationships, Bagozzi (1975) offered a framework for studying exchange that pointed toward different types of exchange and drew attention toward the complexities of relationships in markets. Bagozzi (1975, p. 32) argued that in reality, marketing exchanges often are indirect; they may involve intangible and symbolic aspects, and more than two parties may participate. The three types of exchange introduced by Bagozzi are (1) restricted (two-party reciprocal relationships), (2) generalized



(univocal interactions among at least three parties), and (3) complex (a system of mutual relationships among at least three parties). Bagozzis understanding of complex exchange extends beyond the value chain (Porter, 1985) and points toward a network perspective of markets. Importantly, he distinguishes between linear processes in complex chains (e.g., manufacturer, to retailer, to consumer) and complex circular exchange. The consideration of multiple relationships among a variety of actors broadens the view of value creation beyond the dyad of the rm and customer or B2C relationships. In addition, the study of networks also points toward interactions that occur beyond the connes of an exchange encounter. Grannovetter (1985, pp. 495496) addressed the social and economic nature of exchange by describing the embeddedness of economic activity and social structure and the inseparability of business and society. He explains, There is evidence all around us of the extent to which business relations are mixed up with social ones y business relations spill over into sociability and vice versa y it is not only at top levels that rms are connected by networks of personal relations, but at all levels where transactions must take place. In this view, economic exchange always takes place in the context of social interactions and the overarching value of an exchange is derived from both economic and social benet. Research on networks in marketing also points toward consequences for such embeddedness. Hakansson and Prenkert (2004, p. 77) argue, despite the basic economic utilitarian purpose we have to consider the inclusion of social aspects y we have to consider the possibility that exchange, embedded in technical and social items and structures changes economic logic. In other words, in this view, micro-level exchange encounters contribute to the meso- and macro-level norms and other social forces that guide the logic of a given exchange. Johanson and Stromsten (2000) narrow this idea of economic and social embeddedness and propose interlocking layers of value creation, the exchange layer, and the resource layer. The authors suggest that value creation occurs through a network of multiple partners, connected by a value realization process in which all actors are better off after exchange. In this view, the exchange layer is embedded in the resource layer. Johanson and Stromsten (2000, p. 5) elaborate the exchange and resource layers:
y a difference between the exchange layer and the resource layer is that the latter is more complex and extensive y resources connected do not only follow the exchange of resources. The resource layer is more tacit and more difcult to completely codify. The rms ability to realize a products value in exchange is the result of how well it creates value in the utilization of its resource collection, which is bounded to the context the rm

An Exploration of Networks in Value Cocreation

is part of. The value of a specic resource arises from knowledge about what someone can do with it in combination with another resource.


The authors description of the exchange layer and resource layer falls in line with the relationship between value-in-exchange and value-in-use or value-in-context discussed above. Importantly, this view emphasizes the way in which potential resources become resources through the social construction of what is considered valuable in a particular context, largely through the construction of the social context itself. Johanson and Stromsten (2000) also support the fundamental argument of service-forservice exchange by explaining that resources should not be considered as inputs in the process of production. They argue that it is the service generated, or function derived from a resource that ultimately creates value (Penrose, 1959), and that, because of variations in context, identical resources can be used for different purposes depending on existing knowledge and environmental (including social) circumstances. The literature on networks related to markets and marketing emphasizes the interaction among different types of actors and indicates that exchange is embedded within networks of dynamic social relationships. Thus, any given exchange encounter both draws on and contributes to networks of social and economic relationships and cannot be separated or isolated from its context. From an S-D logic, service-ecosystems view, the idea of embeddedness sheds light on the relationship between value-in-exchange and value-in-use and unies both types of value into one process value cocreation. Although the value cocreation process often requires the facilitation and measurement provided by value-in-exchange, it is driven by continual efforts to create value-in-use, or value-in-context. The integration of internal and external resources made available in the market by rms and other economic actors is the determining factor of the value that is created through the processes of exchange. In this view, networks contribute to the creation of value at multiple levels. At a micro level, networks enable access to resources through exchange, but at a macro level, interaction within and among networks drives the (re)development of norms and meanings, which are central for determining what resources are and how they can be integrated. Incomplete Resources and Networks The literature on networks in marketing suggests that the development of interdependent relationships among multiple actors is driven by the fact that



no individual actor has all the resources it needs. In this view, even if an actor had all of the constituent elements that make up resources, it would not have the necessary knowledge to create value by itself or access all of the resources it needs and/or wants. Gummesson (2006, p. 292) explains, [marketing] is not about either supplier centricity or customer centricity; it is about balanced centricity. According to Ford and Hakansson (2005), interdependence is an integral characteristic of interactive structures, specically networks of exchange. The authors make an important connection between the development of relationships and the sharing of resources in networks:
The interdependencies between actors relate closely to the fact that their respective resources are not isolated but are related to each other. This has at least two aspects: Firstly, an actors own physical, nancial, human and technological resources form the basis for its operations y [but] it is only through interaction that the actors resources can be transformed into capabilities that are of value to others and hence form a basis for interdependence y secondly, it is through interaction that the existing resources of other actors can be activated as counterparts to an actors own resources. (p. 14)

Along those lines, Ford, Gadde, Hakansson, and Snehota (2002, p. 2) discuss the importance of networks for accessing needed resources by explaining that no company alone has the resources, skills or technologies that are necessary to satisfy the requirements or solve the problems of any other and so is dependent on the skills, resources and actions of suppliers, distributors, customers and even competitors to satisfy those requirements. This means that each individual actor requires a network of resources, accessed through partnerships with other businesses, in order to meet the needs of another. The network setting extends without limits through connected relationships, making any business network boundary arbitrary (Anderson, Hakansson, & Johanson, 1994, p. 3). The incomplete nature of networks underscores the importance of collaboration in value cocreation. Because actors are in continuous need of access to resources they do not own, the service rendered from exchange may be needed again after the initial exchange has occurred. If an exchange encounter results in value creation (e.g., the customer is satised), it is likely that the exchange will be repeated. If one, or both, of the partners is not satised, the process of collecting information, negotiating value-inexchange and assimilating and transferring knowledge will begin again. The consideration of value cocreation through networks of relationships emphasizes the continual need for actors to interact and exchange with others in order to access the resources they need or want (Lusch & Vargo, 2006a). Importantly, as resources are transferred throughout networks,

An Exploration of Networks in Value Cocreation


knowledge is shared and new knowledge is created and thus the interconnected actors are always learning (Lusch et al., 2010). Consequently, a resource that is exchanged contains the combinations of several resources y therefore, the exchange of a resource between actors implies a realization of value, not the creation of the same (Johanson & Stromsten, 2000, p. 2). The variety of combinations associated with any particular resource is dependent upon the norms and meanings that guide interaction and the derivation of value in a particular context. The continuous exchange of resources and ongoing interactions among actors drives the continual evolution of knowledge and it is the generation of new knowledge that fuels the economy and advances society. Even if all the tangible resources known to humans were made available, without knowledge of how to use them there would be no utility, functional or otherwise. However, the knowledge of how to use a particular resource is not static; it is continually revised as interaction, especially exchange, occurs. Within the context of a network, a single rm does not have the capabilities to inform, and in a sense train, its heterogeneous customers on its own. Perhaps more importantly, customers often assign new norms and meanings to rms value propositions. The difculties in generating and transferring operant resources establish a need for the strategic positioning and creation of network structure that support and drive knowledge transfer among all types of social and economic actors.

Experience Networks and System Density The network perspective underscores the mutually benecial nature of relationships in markets and emphasizes the importance of a rms development of a value proposition. This is because, in this view, rms can only propose value and contribute to the value-realization process; they cannot create it on their own (Vargo & Lusch, 2004, 2008). Thus, as mentioned, it is ultimately a customers evaluation of an experience, through the use of a value proposition and integration of internal (e.g., competence) as well as external (e.g., social, legal, and political institutions) resources, that determines its value (Prahalad & Ramaswamy, 2004; Vargo & Lusch, 2008). Experiences are achieved through the adaptation and application of available resources. Holbrook (1999, p. 8 emphasis in original) elaborates on the concept of experience by experience, I mean that consumer value resides not in the product purchased, not in the brand chosen, not in the object possessed, but rather in the consumption experience(s) derived there



from. In this way, an experience is central to the creation of value for a customer. Prahalad and Ramaswamy (2004) provide a network perspective on the concept of customer experiences with the introduction of experience networks. The authors argue that value is cocreated at multiple points of interaction and that the basis of value is cocreation experience. In other words, in this view, value is derived through the cocreation of an experience through interaction and exchange of resources, especially knowledge and skills, in a network of rms, customers, and other stakeholders. Importantly, this view of an experience network emphasizes the role of rms in constructing a network to best facilitate a particular experience. Moreover, in addition to value cocreation, Prahalad and Ramaswamy (2004) discuss the coextraction of value, or the collaborative effort required to determine or extract the value of a particular resource. This suggests that collaborative efforts are not only required for the generation of new resources but also necessary for the determination of value on existing resources as well, including natural resources. Importantly, the outcome of a cocreated or coextracted experience (i.e., value) is unique to each person and varies depending on how a particular customer is able to interact within a network and integrate available resources. Normann (2001, p. 96) sheds light on the importance of knowledge in experience networks by describing the experience phenomena within the context of a value system. His understanding of experience focuses on knowledge, relationships, and an actors position in a market. Individual objects are of minimal importance and relationships and market positions become key factors in value-creating systems. Importantly, the information about objects and relationships is more valuable than the objects and actors themselves. However, this information or knowledge is not a given, as it is continually regenerated through interaction and exchange. Moreover, in value-creating systems, value is derived from the knowledge of how to build and maintain long-term relationships through interdependent exchange. These types of interdependent relationships change the aspects of time and space in a network and the creation of value moves from a sequential process to a process of simultaneous, synchronous, and reciprocal interaction. Because the knowledge of a system and its offerings are more than the system and an offering itself, the conguration of the value-creating system can compress and actually create time. This is done by implementing the principle of density, which Normann and Ramirez (1993, p. 69) dene as a measure of the amount of information, knowledge, and other resources that an economic actor has at hand at any moment in time to leverage his or her

An Exploration of Networks in Value Cocreation


own value-creation. If a combination of resources is effectively mobilized for a specic situation, and a particular time and place, value will increase (Normann, 2001). In this way, information and knowledge are the drivers of value creation. By arranging relationships and access to resources so they are more available at opportune places and times, the offering will actually free up time for other activities to be done. In order to provide access to resources at more opportune times and places, Normann (2001) says that rms should focus on their ability to break up or unbundle resources and put together or rebundle available offerings. He explains how an actors utilization of an asset is not isolated or focused solely on the present; it is assimilated with surrounding resources and includes considerations of future benet or use. Normann (2001, p. 114, emphasis added) argues, The more we are interested in the utilization of an asset, the more we need to know how it ts into a context of future production and value creation y [thus], information about the asset in context and not only the asset itself is critical to us. This concept of density falls in line with an S-D logic view on value cocreation and value-in-context (Vargo et al., 2008). Furthermore, the elaboration of the literature on networks in marketing provides added insight to the processes of value cocreation and nature of the context through which value is created.


The concept of value-in-context is an important shift from thinking about value created in a dyad to value created in a network. Importantly, the context that frames value creation and exchange (Chandler & Vargo, 2011) is composed of interconnected networks of relationships as well as the resources. Some of the most central operant resources in service ecosystems are the social norms and meanings, or institutions (Edvardsson et al., 2011) that inuence, but are also inuenced by, value cocreation and exchange (Vargo & Lusch, 2011b). In this view, processes of value cocreation draw on social contexts as operant resources those that inuence the use and integration of other resources. However, the efforts of individual actors to create value for themselves and for others also contribute to the formation of social contexts (composed of relationships and resources) via contextualization (Chandler & Vargo, 2011) or institutionalization (Edvardsson et al., 2011) processes as well. Table 1 provides an overview of a service-ecosystems



Table 1.
Components of Value Cocreation Exchange Relationships Resources Value

Developing the Concept of Value Cocreation.

Service Ecosystems Networks of Relationships and Resources Multiple actors in networks Embeddedness of exchange relationships Incomplete resources and networks Experience networks and density

Systems of service exchange Dynamic and nested relationships Resource integration Value-in-context

view on value cocreation. It outlines how the literature on networks in marketing helps to advance the understanding of value cocreation in service ecosystems by explicating the importance of relationships and resources in value cocreation and exchange. S-D logics ecosystems perspective of value cocreation recognizes that the foundation of exchange is service the application of knowledge and skills for the benet of another but service exchange occurs among a variety of social and economic actors. The literature on networks in marketing explicates the variety of actors in networks, which includes B2B, B2C, and C2C interactions. This work provides evidence of Vargo and Luschs (2011a) shift toward considering more generic, A2A (actor-to-actor) relationships. This view of relationships in service ecosystems underscores the way in which exchange transactions are nested within broader social contexts. Again, this view on relationships in service ecosystems is supported and elaborated in the networks literature with the discourse regarding embeddedness of exchange. One of the central components of service ecosystems is the recognition of all actors as resource integrators and the primacy of operant resources in exchange and value cocreation. The discussion of resources in the network literature (above) emphasizes the incomplete nature of resources, as well as networks. This sheds light on the reasons why actors must continually integrate both operant and operand resources, and why service ecosystems are in a constant state of evolution and change. From a service-ecosystems view, the integration of resources is driven by actors efforts to derive value through the use of a value proposition, in a particular context. In line with S-D logics focus on the experiential and phenomenological nature of value, the research on networks in marketing suggests that the value is derived and determined through a unique experience and dependent on internal as well as external resources, including the conditions of its

An Exploration of Networks in Value Cocreation


surrounding network (Prahalad & Ramaswamy, 2004). Thus, in this serviceecosystem, network-centered view, the cocreation of value depends on an actors ability to access, adapt, and integrate resources, which is largely inuenced by the social context relationships and resources through which value is derived. Vargo et al. (2008, p. 149) describe how value is cocreated through the sharing of resources among systems of service exchange. They argue, Service systems co-create value, effectively depending on the resources of others to survive. This interdependence drives service-for-service exchange and resource integration. In this service-ecosystems view, the exchange of service is mediated by networks of interconnected relationships in three ways: (1) networks enable actors to access resources through the development of exchange relationships, (2) networks provide a variety of resources for actors to adapt a particular resources with their unique assortments, and (3) networks enable actors to integrate resources within a broader social context to derive unique experiences while developing new norms and meanings (i.e., shared institutions) and contributing back to the social context through which value is derived. Fig. 1 is adapted from Vargo et al.s (2008) model of value cocreation in a service system and depicts the components of service ecosystems and the process by which value-in-context is collaboratively created, through the access, adaption, and integration of resources among multiple actors such as rms and customers, as well as suppliers, stockholders, and reference groups. This consideration of value cocreation in service ecosystems refocuses the process of value creation from a rms production and units of output, to

Co-creating Value-in-Context Access, Adapt and Integrate Resources Employees Actor 1 (Firm) Value-in-Context Derived Value Stockholders Value-in-Exchange Value Proposition/ Money

Co-creating Value-in-Context Access, Adapt and Integrate Resources Reference Groups Actor 2 (Customer) Value-in-Context Derived Value Other Firms



Fig. 1.

The Cocreation of Value in Service Ecosystems. Source: Adapted from Vargo et al. (2008, p. 149).



the ability to access, adapt, and integrate resources by all social and economic actors, within a broad social context. In this value cocreation framework, exchange is conducted in order to render service with the intention of bettering ones circumstances through value-in-use, in a particular context. Because value-in-use is determined through the integration of a number of resources and relationships, the context in which resources are applied is a critical determinant of the value derived. Fig. 2 depicts the process of deriving value-in-context as resources are accessed, adapted, and integrated and how the integration of resources can lead to new ways to access and adapt resources as well. The consideration of value cocreation within networks sheds light on how networks of relationships provide access to necessary resources. However, access to resources is not enough to cocreate value. Resources must also be adaptable within various networks of resources and relationships (assortments). In other words, in order for value to be cocreated, a resource must be accessible through a particular network of relationships and adaptable it must t with other resources at a particular place and time. However, even if a resource is accessible through a particular network and adaptable in a particular assortment of resources, it still is not guaranteed that value will be created. The resource must then be integrated with other resources (operant and operand) and applied in a particular context. As mentioned, one of the key features of networks is that they allow for the transfer as well as generation of knowledge. This is especially critical at the point of integration because even though a resource may be accessible and adaptable, if a given actor does not have the necessary information or knowledge to integrate and apply a particular resource, value cannot be created. That is if an actor is not knowledgeable or capable of using a particular resource, in a particular context, value cocreation will not occur. Moreover, as unique experiences arise in markets, the value determined through those experiences also contributes back to the social context through which it was derived. In other words, as actors learn, they provide

Access Attain Resources via Relationships in Network

Adapt Fit of Resources with Available Assortment

Integrate Fit of Resources in Unique Context

Fig. 2.

Cocreating Value-in-Context.

An Exploration of Networks in Value Cocreation


feedback to the system and improve or make changes in order to increase their abilities to cocreate value in the future. The consideration of the social context that inuences and is inuenced by value cocreation underscores the importance of operant resources in networks and actors abilities to access, adapt, and integrate such resources. This is because in order for value cocreation to occur, actors must have access not only to the value propositions made available by rms, but also to knowledge on how to adapt and integrate them. The following sections draw on the value cocreation framework proposed above and highlight several ways in which rms can increase the accessibility, adaptability, and integrability of resources by (re)conguring networks. A number of research questions are presented for furthering the research on how networks of relationships and resources inuence value cocreation and drive the reformation of social contexts that frame exchange.


The value cocreation framework presented above emphasizes the value derivation or realization process by centering on a concept of value-incontext, which is not limited to the current benets of a particular offering. Rather, in this service-ecosystems view, value-in-context includes the processes and relationships that make up the context through which value is derived. In other words, the cocreation of value-in-context involves the pre-purchase, exchange, use, transfer, and disposal of any asset, which are associated with a number of interactions and relationships. Thus, every customer experience is unique based on a distinct collaboration of relationships and resources, as well as individual and shared knowledge. Cova and Salle (2008) explore the cocreation of value within customer networks and argue for a network approach to value propositions. The authors provide ve steps for processing a customer network value proposition: (1) identifying actors in customer network, (2) targeting actors in customer network, (3) identifying the factors that mobilize actors, (4) accessing or making contact with particular actor, and (5) integrating resources from the network. In line with this view, the framework proposed above suggests that the main requirements for value cocreation are actors abilities to access, adapt, and integrate resources. That is, from this service-ecosystems perspective,



rms develop more compelling value propositions as they increase the ability of customers, as well as other stakeholders, to access operant and operand resources, adapt resources with a specied assortment, and integrate resources in micro-level daily experiences as well as macro-level social contexts. In a network of relationships and resources, the combinations of resource integration are limited only to the number of views and perspectives of value within a given network. This view of value creation shifts the focus of proposing value from customizing offerings for customers, to enabling customers to customize their own assortment of resources, based on individual needs and contexts. The conguration of an actors surrounding network of relationships ultimately inuences its accessibility to resources as well as its ability to adapt and integrate resources, to create value for themselves and for others. In this way, value cocreation is not limited to a single exchange event; rather it is driven by the process of value derivation, which includes accessing, adapting, and integrating operant and operand resources from multiple service providers. Thus, value cocreation is inuenced by the shape of the network and norms and meanings that guide interaction among participating social and economic actors. Because social contexts differ, the value determined through use and context is heterogeneous in nature, and value cocreation relies highly on the quality of an actors surrounding network. The conditions of networks, within service ecosystems, are inuenced by their congurations and ability to provide access to operant (and operand) resources when and where they are needed meeting time/ space/actor specications. The conguration of each actors network of relationships and resources inuences that actors accessibility to necessary resources and impacts the adaptability and integrability of resources accessed through exchange (Normann, 2001). Thus, to develop compelling value propositions, rms must increase the accessibility, adaptability, and integrability of its offerings. This can be done by (re)conguring relationships and resources in surrounding networks and is discussed below.

Increasing Accessibility This service-ecosystem, network approach to value cocreation suggests that the shape and dynamics of a network can inuence the sharing of knowledge and can moderate value creation for individuals and groups of individuals (e.g., organizations) throughout a service ecosystem. Thus, value cocreation depends highly on the quality of each actors surrounding network. In this

An Exploration of Networks in Value Cocreation


view, the main role of marketing is to develop or congure relationships among rms, customers, and other stakeholders from which customers or service beneciaries can draw on to cocreate experiences (Prahalad & Ramaswamy, 2004). The accessibility of a resource depends on how, where, and when a service can be rendered and the relationships that enable service provision (resource application) at the most appropriate place and time. It also requires the awareness of a potential resource or value proposition and an understanding of how that resource can be accessed. The considerations for conguring relationships to increase accessibility of a value proposition are: How do differences in actors positions inuence interaction among actors? How do differences among actors and their relations inuence the interactions among actors or the development of relationships? Whom do actors rely on for information about what resources are accessible and how to access them? To shed light on how the positions of actors inuence value cocreation, Chandler and Wieland (2010) propose centrality, a useful way of conceptualizing and measuring relationships in systems (Wasserman & Faust, 1994). Wasserman and Faust (1994, p. 173) dene a central actor as one involved in many ties. Thus, centrality is a property of an actors position the particular set of relationships connected to one actor in a network. Centrality is often considered a measure of prominence in a particular network (Wasserman & Faust, 1994) and is an appropriate measure for studying social and economic phenomena such as access to resources and brokerage of information (Knoke & Burt, 1983). In this way, the relationship between an actors centrality in a network and its contribution to the interaction in that system can provide insight to how the conguration of a network contributes to the development of new relationships. The literature regarding networks suggests that, in addition to an actors position in a system, the nature of that actors relations with other actors will also contribute to the development of relationships and accessibility of resources. Granovetter (1973, p. 1361) discusses two types of relations in particular, strong ties and weak ties. He denes the strength of tie as a combination of the amount of time, the emotional intensity (mutual conding) and the reciprocal services which characterize the tie. His view suggests that weak ties are important in service ecosystems because they act as bridges between networks and provide the primary means for transferring information from one network to another. However, Granovetter (1983) also states that strong ties play a useful role as well. He argues that strong ties have the greater motivation to be cooperative and make resources more easily accessible.



In marketing-related research, Brown and Reingen (1987) found support for Granovetters (1973) theory that weak ties are more likely to transfer information across networks. However, they also found that when both strong and weak ties were available, individuals selected to draw on the information provided by strong ties. Moreover, they also found that the information received from strong-tie sources was considered more inuential than from weak-tie sources. Thus, although weak ties have been found to be good sources for bridging networks and sharing ideas across networks, strong ties have been found to be more favorable and inuential within closely connected networks. Further exploration into the properties of network positions and inuence in networks can help to shed light on more effective ways of positioning actors or developing relationships within particular service ecosystems.

Increasing Adaptability Once resources are made accessible, via the appropriate relationships, they still need to be adaptable to t the resource needs of a particular actor at a particular place and time. Thus, adaptability is an important factor in resource integration and value cocreation. The adaptability of a resource is based on the t an accessible resource has in an actors existing or desired assortment of accessible resources (Alderson, 1957). The questions that arise in the consideration of increasing adaptability of a value proposition in a network or service ecosystem are: How does this value proposition complement or adapt to the resources that are currently accessible by customers? How is a resource adapted in different areas of customers lives? Do customers have the knowledge and/or skills needed to render the proposed value? What are the social norms and meanings (i.e., institutions) guiding the adaption of a particular resource, in a particular context? As discussed, an individuals competence plays a major role in value cocreation. However, a persons self-concept, identity as well as cultural meanings and values also inuence the value determined by a customer at a particular place and time. Because value is always derived and determined through use, value cocreation inherently implies self-customization. Thus, the adaptability of a particular resource largely depends on a customers self-customization process and context. In this view, customization occurs through a customers adaptation of resources with other private, public, and market-facing resources rather

An Exploration of Networks in Value Cocreation


than in the rms production and delivery processes. Self-customization differs from business models of mass customization, which invite customers to coproduce customized offerings. It is inherent in value cocreation and occurs through the application of a variety of resources through a dynamic network of service providers. This type of customization can be seen in the way in which customers apply resources to create an outt, cook a meal, and decorate a room. Because every assortment of resources is unique (Alderson, 1957), individuals apply various resources in different ways to self-customize their lives. Self-concepts and social inuences aid the processes of self-customization in value cocreation. Although self-customization is a critical aspect to adapting resources to meet individual needs, social norms are often guiding forces in the adaptation of value propositions. These institutions (Williamson, 2000) provide actors with the rules for what are acceptable and inacceptable behaviors and what constitutes a resource in a particular social context. However, reliance on social norms does not result in homogenous viewpoints or behaviors across service ecosystems or markets. This is because these social inuences, what Sewell (1992) calls structure, are multidimensional and dynamic. In other words, a particular actor is guided by any number of institutions as value propositions are used and adapted to meet different needs in different times and places. Further research in understanding how institutions inuence the adaptation of resources across different contexts would help to advance the understanding of how varying institutions and contexts inuence value cocreation.

Increasing Integrability Once a resource is accessed and adapted to t with other resources, it must still be integrated through an experience, nested within the broader social context, in order for value to be realized. Thus, in order to develop compelling value propositions, rms need to consider how their value propositions are uniquely integrated at a micro level in the daily lives of their customers, and how the unique experiences of customers then contribute to the integration of resources at a macro level by recreating norms and meanings associated with a particular resource. The integrability of resources ability for resources to be integrated at micro and macro levels is central to developing long-term relationships through exchange. Although resources must rst be accessible and adaptable through a network, the issue of integrability raises questions such as: How does a



resource contribute to customers self-concept or cultural meanings? What kind of new knowledge can be generated from the application of a particular resource? How do customers develop new meanings or uses for value propositions? From the broadened ecosystems/network framework of value cocreation, it becomes obvious that exchange is not a dyadic encounter; rather it is a continuous process that provides access to service within a system of interdependent actors. The value cocreated in a service system is dependent on the conguration and interaction within the system itself. As mentioned, the reconguration of a system, and bundling and unbundling of resources, addresses time and space constraints for actors. In a sense, rms can increase the ability to integrate a particular resource by increasing systems density (Normann, 2001). When rms make efforts to unbundle and rebundle or enable customers to rebundle its resources in ways that best t with other resources, the potential for value cocreation to occur increases. However, rms must be careful to focus on the operant resources required for the use of a particular market offering. This will encourage customers to personalize not only any tangible part of a particular experience but also the meanings associated with that experience. The picture presented in Fig. 1 reects the mobilization of resources based on the conguration of market relationships and activities that enable the cocreation of value among a group of social and economic actors. As seen in Fig. 2, the value derived in a system of service exchange occurs through the process of accessing, adapting, and integrating resources. Ideally, all actors within a system will have access to all the knowledge and specialization needed at any given place and time. However, this is often not the case. Because processes of value cocreation require that the resources accessed and adapted be integrated in a variety of social contexts, new knowledge is continually generated (Lusch & Vargo, 2006b). These resources are further transferred, and accessed, adapted, and integrated across networks within service ecosystems and drive economic and social evolution. The way in which customers develop their own norms and meanings has been extensively studied in the growing area of consumer culture theory (Arnould & Thompson, 2005). However, the process by which the micro-level actions and interactions among multiple stakeholders draw on and contribute to the constitution of macro-level structures (Giddens, 1984) has received limited attention in marketing literature. Thus, the exploration of the cocreation of norms and meanings as well as value from a service-ecosystems view will help to strengthen the

An Exploration of Networks in Value Cocreation


understanding of how various social and economic actors contribute not only to the creation of value but also to the creation of cultures.

The framework for value cocreation presented in this essay fundamentally shifts the underlying focus of value creation away from a rms output. It suggests that all economic actors access, adapt, and integrate resources to cocreate value for themselves and for others, and that knowledge is the core resource of all exchange. In this view, exchange is done in order to render service or apply the knowledge of others with the intention of bettering the circumstances of both the provider and the beneciary. In each exchange encounter, all participating parties give up something of value for something that is expected to be of greater value. It is the application of operant resources that uniquely benets each actor and allows the generation of new knowledge and other resources. This viewpoint of continuous knowledge transfer, application and generation, throughout an innite web of value cocreation, has many implications for the study and practice of marketing. This deeper understanding of value cocreation can potentially inuence the scope and responsibilities of marketing, strategic initiatives of the rm, attitudes toward innovation and globalization, and, ultimately, societal wellbeing. As reviewed in the literature above, the study of marketing is currently in a state of transition. Although the study of value cocreation remains in its early stages, the framework proposed in this essay provides an important avenue for studying the way in which networks of relationships and resources inuence value cocreation. S-D logics ecosystems view on value cocreation and resource integration provides an overarching mindset for how value is created through exchange and related relationships. The existing literature on networks in markets and marketing helps to ground this logic, and appears to be an essential viewpoint for studying the complexities of relationships associated with value cocreation. However, networks should be observed and analyzed through an S-D logic ecosystems lens in order to better understand the dynamic realities and underlying mechanisms driving market exchange. The proposed framework suggests that neither the rm nor the customer plays a central role in the process of value creation by itself. The focus of value cocreation remains in a particular actors ability to access, adapt, and integrate resources, and the value derived depends on the participation and



perspective of a particular actor, nested within a particular network and social context composed of relationships and resources. Importantly, the knowledge generated by one exchange will inevitably pass on through future exchange with multiple actors. Because of the innite number of connections through a service ecosystem, the cocreation of value never ceases. Like a service ecosystem, the process of value cocreation has no denite beginning or end. This has major implications for how enterprises organize and move away from highly structured bureaucracies and tightly vertically integrated marketing systems, to more open forms of real-time sensing and responding to problems and opportunities. From this value cocreation framework, the responsibilities of marketing move beyond the marketing department or classic marketing function because the role of marketing itself increases tenfold. As Drucker (1954) suggested, the two functions of the enterprise are marketing and innovation. And this can be further reduced to innovation when one realizes that innovations create markets. But these innovations are not considered within the domain of the enterprise. It is becoming increasingly evident that innovation, and thus marketing, is a social process, which is most often led by users (Von Hippel, 2005). In this view, the role of marketing can still be considered as the facilitation of exchange. However, within a network, connections are not unidirectional or dyadic and marketers must take on the role of negotiators of exchange. Dialogue (Ballantyne & Varey, 2006), or what can be thought of as learning together, plays a critical role in the communication among rms and customers. This leads to increasingly viewing the market itself as a conversation or a set of unfolding dialogues that result in the discovery of new solutions and compelling value propositions essentially, an effectuation process (see Read, Dew, Sarasvathy, Song, & Wiltbank, 2009). In the process of value cocreation in this dynamic and unfolding world, a rms marketing effort must guide internal and external communications, conversation, and knowledge exchange. The core competency of any rm is grounded in the knowledge of its employees as well as customers or its surrounding network of relationships and resources. The encouragement of shared knowledge among rms, customers, and even competitors will increase the competency of a rm as a whole and strengthen its competitive advantage. This will occur more often when enterprises develop adaptive competences that allow them to adjust to changing circumstances and contexts (Lusch, Vargo, & OBrien, 2007). Furthermore, the conceptualization of interaction among rms and customers drastically changes under the value cocreation framework. A

An Exploration of Networks in Value Cocreation


rms strategic approach to marketing with rather than marketing to should consider the customers position in a market network (Lusch et al., 2007). As portrayed in Fig. 1, the conguration of a customers surrounding network moderates a customers ability to access, adapt, and integrate of resources, and the network itself is a mediator of value cocreation. Firms must pay attention to the conguration of such systems and recongure relationships and resources to increase the accessibility, adaptability and integrability of resources, and ultimately increase systems density (Lusch et al., 2010; Normann, 2001). In this view, rather than aiming to provide customized offerings, rms should encourage customers to utilize surrounding resources and customize their own offerings. While this increases the responsibility of the customer, it also encourages the customer to engage in the value-creation process as an active, rather than passive participant. One of the benets of this approach is that customers, in their efforts at clever integration of a rms offerings with other resources, discover new and novel ways to improve a rms offerings. In other words, increasing the integrability of a value proposition involves increasing the likelihood that customers will assign new meanings and uses to rm offerings and potentially develop deeper relationships with rms. If a rm is engaged in a market through conversation and dialogue, it will learn along with the customer. To encourage such self-customization, rms should provide access to unbundled resources, even if some of these may be from other rms, and possibly competitors, and allow customers to rebundle them, adding efciency and effectiveness, as well as customer creativity, in the process of value cocreation. In value cocreation, the customer is understood to be a part of the valuecreation process and is relied on to continue the cocreation process, through the use of a rms value proposition. Because a customers viewpoint on value is dependent upon his or her surroundings, a rm must be keenly aware of customers sources of knowledge (e.g., institutions) and the social contexts inuencing value creation, which include friends, family, ethnicity, religion, occupation, or professional identity and other reference groups or afliations. All of these have a bearing on the actions and interactions among customers in their various roles, which are part of their everyday life experiences. Rather than increasing value adding (Porter, 1985) activities within a rm or adding external attributes to an offering, rms must focus on the relationships and resources of customers. Accepting this view of value cocreation will require rms to shift strategies and reallocate their efforts in marketing and communications processes. It will also help inform rms



how to represent their offerings in symbols and imagery that align with customer perspectives. In addition, instead of focusing on unidirectional communications, from rm to customer, rms should consider other inuences on a customers knowledge and the accessibility, adaptability, and integrability of resources in a particular network of relationships and resources. In turn, this will help rms navigate away from overly trying to manage their brand, to collaborating with customers and other stakeholders to cocreate a brand. Moreover, this shift in viewing value cocreation among networks of relationships, and emphasis on contextual value, will likely lead to viewing brand communities as one of an enterprises most valuable resources (Merz, He, & Vargo, 2009; Schau, Muniz, & Arnould, 2009).

The potential of value cocreation in a service ecosystem is innite but also unpredictable and not something that can be optimized; it can however be realized. S-D logic presents a viewpoint for the continuous transfer, generation, and application of knowledge to enable rms as well as customers (and other stakeholders) it serves to better realize their potential. From this view, the creation of value is not conned to the production processes of a rm; rather it is derived and determined through use, in a particular context value-in-context of many actors. The existing literature on networks in markets and marketing supports this understanding of exchange by emphasizing the interdependence of actors and a continuous medium for the ow of service and value cocreation. This service-ecosystems, network-centric approach to value cocreation underscores the importance of relationships and resources in markets and marketing. In this framework, the cocreation of value is driven by the ability to access, adapt, and integrate resources within networks of multiple stakeholders. The examination of exchange is broadened from its traditional linear and dyadic framework and inspected within the context of a dynamic, uncertain, and networked market. In this service-ecosystems view, the exchange of service and cocreation of value are continuous, and knowledge generation, even when gained via errors or failure, is ever increasing. The scope of the network is endless and its structure is always changing and morphing in surprising ways. There is much to discover about how value cocreation occurs in systems of service exchange. In particular, although this essay identied the

An Exploration of Networks in Value Cocreation


importance of accessing, adapting, and integrating resources in value cocreation the specic ways in which rms can increase the accessibility, adaptability, and integrability of resources through the (re)conguration of networks requires further examination. The identication of these components of value cocreation point toward additional avenues of research to be explored and fertile areas of literature, beyond the scope of current marketing research, from which deeper insights can be drawn e.g., social network theory (Wasserman & Faust, 1994), institutional theory (Williamson, 2000), and structuration theory (Giddens, 1984) (see Vargo & Lusch, 2011a for details). Although the implications of value cocreation are evident in todays complex market and society, more research and empirical studies are also needed to better understand the processes and complex structures through which value is cocreated. Just as the process of value cocreation drives innovation and the evolution of markets through the generation of new knowledge, it enables academic knowledge to progress. The understanding of value cocreation will only increase from the combined effort of multiple actors, cooperating and competing to propel continuous transfer and generation of knowledge.

Akaka, M. A., & Chandler, J. D. (2010). Practices, processes, positions and propositions: A resource-based approach to value co-creation in value networks. Paper presented at the forum on markets and marketing. Cambridge, UK. Akaka, M. A., & Chandler, J. D. (2011). Roles as resources: A social roles perspective of change in value networks. Marketing Theory, 11(3), 243260. Alderson, W. (1957). Marketing behavior and executive action a functionalist approach to marketing theory. Homewood IL: Richard D. Irwin. Anderson, J. C., Hakansson, H., & Johanson, J. (1994). Dyadic business relationships within a business network context. Journal of Marketing, 58(4), 115. Arnould, E. J., & Thompson, C. J. (2005). Consumer culture theory (CCT): Twenty years of research. Journal of Consumer Research, 31(March), 868883. Bagozzi, R. P. (1975). Marketing as exchange. Journal of Marketing, 39(October), 3239. Baldwin, C. (2007). Where do transactions come from? Modularity, transactions, and the boundaries of rms. Industrial and Corporate Change, 17(1), 155195. Ballantyne, D., & Varey, R. J. (2006). Creating value-in-use through marketing interaction: The exchange logic of relating, communicating and knowing. Marketing Theory, 6(3), 335348. Brown, J. J., & Reingen, P. H. (1987). Social ties and word-of-mouth referral behavior. The Journal of Consumer Research, 14(3), 350362. Chandler, J. D., & Vargo, S. L. (2011). Contextualization and value-in-context: How value frames exchange. Marketing Theory, 11(1), 3549.



Chandler, J. D., & Wieland, H. (2010). Embedded relationships: Implications for networks innovation and ecosystems. Journal of Business Marketing Management, 4, 199215. Constantin, J. A., & Lusch, R. F. (1994). Understanding resource management. Oxford, OH: The Planning Forum. Cova, B., & Salle, R. (2008). Marketing solutions in accordance with the S-D logic: Co-creating value with customer network actors. Industrial Marketing Management, 37(3), 270277. Drucker, P. (1954). The practice of management. New York, NY: Harper & Row Publishers. Edvardsson, B., Tronvoll, B., & Gruber, T. (2011). Expanding understanding of service exchange and value co-creation: A social construction approach. Journal of the Academy of Marketing Science, 39(2), 327339. Ford, D., Gadde, L., Hakansson, H., & Snehota, I. (2002). Managing networks. 18th IMP Conference, Perth, Australia. Ford, D., & Hakansson, H. (2005). The idea of business interaction. The IMP Journal, 1(1), 427. Giddens, A. (1984). The constitution of society. Berkley, CA: University of California Press. Granovetter, M. S. (1973). The strength of weak ties. American Journal of Sociology, 78(6), 13601380. Granovetter, M. S. (1983). The strength of weak ties: A network theory revisited. Sociological Theory, 1, 201233. Granovetter, M. (1985). Economic action and the social structure: The problem of embeddedness. The American Journal of Sociology, 91(3), 481510. Gro nroos, C. (1994). From marketing mix to relationship marketing: Towards a paradigm shift in marketing. Managment Decision, 32(2), 420. Gummesson, E. (2005). A network approach to service marketing: From dyads to manyto-many. Paper presented at the Otago Forum. University of Otago, Dunedin, New Zealand. Gummesson, E. (2006). Many-to-many marketing as grand theory. In R. F. Lusch & S. L. Vargo (Eds.), The service-dominant logic of marketing: Dialog, debate and directions (pp. 339353). Armonk, NY: M.E. Sharpe. Hakansson, H., & Prenkert, F. (2004). Exploring the exchange concept in marketing. In Rethinking marketing (Vol. 5). Hoboken, NJ: Wiley. Holbrook, M. (1999). Introduction to consumer value. In M. Holbrook (Ed.), Consumer value: A framework for analysis and research (pp. 128). London: Routledge. Iacobucci, D. (Ed.). (1996). Networks in marketing. Thousand Oaks, CA: Sage. Johanson, M., & Stromsten, T. (2000). Value creation in industrial networks. Paper presented at the 16th IMP-conference, September 79, Bath. Knoke, D., & Burt, R. (1983). Prominence. In E. B. Minor (Ed.), Applied network analysis (pp. 195222). Newbury Park, CA: Sage. Lusch, R. F., & Vargo, S. (2006a). Service-dominant logic: Reactions, reections and renements. Marketing Theory, 6(3), 281288. Lusch, R. F., & Vargo, S. (2006b). Service-dominant logic as a foundation for a general theory. In R. F. Lusch & S. L. Vargo (Eds.), The service-dominant logic of marketing: Dialog, debate and directions (pp. 406420). Armonk, NY: M.E. Sharpe, Inc. Lusch, R. F., Vargo, S., & OBrien, M. (2007). Competing through service: Insights from service-dominant logic. Journal of Retailing, 83(1), 518. Lusch, R. F., Vargo, S., & Tanniru, M. (2010). Service, value networks and learning. Journal of the Academy of Marketing Science, 38(1), 1931.

An Exploration of Networks in Value Cocreation


Merz, M., He, Y., & Vargo, S. L. (2009). The evolving brand logic: A service-dominant logic perspective. Journal of the Academy of Marketing Science, 37(3), 328344. Moller, K. K., & Svahn, S. (2006). Role of knowledge in value creation in business nets. Journal of Management Studies, 43(5), 9851007. Normann, R. (2001). Reframing business: When the map changes the landscape. Chichester, UK: Wiley. Normann, R., & Ramirez, R. (1993). From value chain to value constellation: Designing interactive strategy. Harvard Business Review, 71(4), 6577. Payne, A. F., Storbacka, K., & Frow, P. (2008). Managing the co-creation of value. Journal of the Academy of Marketing Science, 36(1), 8396. Penrose, E. T. (1959). The theory of the growth of the rm. New York, NY: Wiley. Peppers, D., Rogers, M., & Dorf, B. (1999). Is your company ready for one-to-one marketing? Harvard Business Review, 77(1), 151. Porter, M. (1985). Competitive advantage. New York, NY: Free Press. Prahalad, C. K., & Ramaswamy, V. (2004). Co-creation experiences: The next practice in value creation. Journal of Interactive Marketing, 18(3), 514. Ramirez, R. (1999). Value co-production: Intellectual origins and implications for practice. Strategic Management Journal, 20(1), 4965. Read, S., Dew, N., Sarasvathy, S. D., Song, M., & Wiltbank, R. (2009). Marketing under uncertainty: The logic of an effectual approach. Journal of Marketing, 73(3), 118. Schau, H. J., Muniz, A. M., Jr., & Arnould, E. J. (2009). How brand community practices create value. Journal of Marketing, 73(September), 3051. Sewell, W. (1992). A theory of structure: Duality, agency, and transformation. American Journal of Sociology, 98(1), 129. Shostack, G. L. (1977). Breaking free from product marketing. Journal of Marketing, 41(April), 7380. Vargo, S. L. (2009). Toward a transcending conceptualization of relationship: A servicedominant logic perspective. Journal of Business and Industry Marketing, 24(5/6), 373379. Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68(January), 117. Vargo, S. L., & Lusch, R. F. (2006). Service-dominant logic: What it is, what it is not, what it might be. In R. F. Lusch & S. L. Vargo (Eds.), The service-dominant logic of marketing: Dialog, debate and directions (pp. 4356). Armonk, NY: M.E. Sharpe, Inc. Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: Continuing the evolution. Journal of the Academy of Marketing Science, 36(1), 110. Vargo, S. L., & Lusch, R. F. (2011a). Its all B2B and beyondy: Toward a systems perspective of the market. Industrial Marketing Management, 40(2), 181187. Vargo, S. L., & Lusch, R. F. (2011b). From goods-dominant logic to service-dominant logic. Invited presentation at Workshop on service-dominant logic: An evolution or revolution in marketing theory and practice? Concordia University, Montreal. Vargo, S. L., Lusch, R. F., & Morgan, F. W. (2006). Historical perspectives on servicedominant logic. In R. F. Lusch & S. L. Vargo (Eds.), The service-dominant logic of marketing: Dialog, debate and directions (pp. 2942). Armonk, NY: M.E. Sharpe, Inc. Vargo, S. L., Maglio, P. P., & Akaka, M. A. (2008). On value and value co-creation: A service systems and service logic perspective. European Management Journal, 26(3), 145152. von Hippel, E. (2005). Democratizing innovation. Cambridge: MIT Press.



Ward, J., & Reingen, P. (1996). A network perspective on crossing the micro-macro divide. In I. Dawn (Ed.), Networks in marketing. Thousand Oaks, CA: Sage. Wasserman, S., & Faust, K. (1994). Social network analysis: Methods and applications. New York, NY: Cambridge University Press. Williamson, O. (2000). The new institutional economics: Taking stock, looking ahead. Journal of Economic Literature, 38(September), 595613.