See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/259098265

The Apple business model: Crowdsourcing mobile applications

Article  in  Accounting Forum · December 2013

DOI: 10.1016/j.accfor.2013.06.001

CITATIONS READS

38 4,646

2 authors:

Birgitta Bergvall-Kåreborn Debra Howcroft

Luleå University of Technology The University of Manchester
81 PUBLICATIONS   1,906 CITATIONS    91 PUBLICATIONS   2,943 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

MyHealth@Age View project

Safe steps View project

All content following this page was uploaded by Debra Howcroft on 01 February 2018.

The user has requested enhancement of the downloaded file.

This article appeared in a journal published by Elsevier. The attached
copy is furnished to the author for internal non-commercial research
and education use, including for instruction at the authors institution
and sharing with colleagues.
Other uses, including reproduction and distribution, or selling or
licensing copies, or posting to personal, institutional or third party
websites are prohibited.
In most cases authors are permitted to post their version of the
article (e.g. in Word or Tex form) to their personal website or
institutional repository. Authors requiring further information
regarding Elsevier’s archiving and manuscript policies are
encouraged to visit:
http://www.elsevier.com/authorsrights
 Author's personal copy

Accounting Forum 37 (2013) 280–289

Contents lists available at ScienceDirect

Accounting Forum
journal homepage: www.elsevier.com/locate/accfor

The Apple business model: Crowdsourcing mobile

applications
Birgitta Bergvall-Kåreborn a , Debra Howcroft a,b,∗
a
Social Informatics, Luleå University of Technology, Luleå, Sweden
b
Manchester Business School, The University of Manchester, Manchester, UK

a r t i c l e i n f o a b s t r a c t

Article history: Much to Apple’s chagrin, the ‘suicide express’ at the Foxconn manufacturing complex in
Received 1 May 2013 China has been widely reported. While outsourcing the manufacture of technology compo-
Received in revised form 3 June 2013
nents is neither new nor unique, the external sourcing of digital content is integral to the
Accepted 4 June 2013
success of Apple’s business model. In 2008, Apple opened up their platform to third-party
IT developers, leveraging their expertise for the supply of applications. Apple’s rapid domi-
Keywords:
nance of the mobile market led to the emergence of a business model that weaves together
Apple business model
Mobile applications development and Internet-enabled mobile devices with digital content, brought together within a closed pro-
distribution prietary platform or ecosystem. Applying a Global Production Network analysis, this paper
Global production network reports on fieldwork among Apple mobile application developers in Sweden, the UK, and
Crowdsourcing the US. The analysis shows that although some developers experience success, financial
Platform returns remain elusive and many encounter intense pressure to generate and market new
IT workforce products in a competitive and saturated market. Crowdsourcing allows Apple to effectively
source development to a global base of software developers, capitalizing on the mass pro-
duction of digital products while simultaneously managing to sidestep the incurred costs
and responsibilities associated with directly employing a high-tech workforce.
© 2013 Elsevier Ltd. All rights reserved.

1. Introduction

Apple Inc. is depicted not only as a ‘stock market star’ (Froud, Johal, Leaver, & Williams, 2012) but as a unique and
novel company with trendy products and quirky inventors, setting it apart from the more staid corporations that typify the
IT industry. Seen as a flagship firm, Apple’s business model is one that many wish to emulate; however, recent reports of
working conditions at manufacturing plants in China have negatively impacted Apple’s brand and reputation. Western firms’
outsourcing of the manufacture of its technology components to low-cost Asian plants is neither new nor unique. What is
both novel and integral to the success of Apple’s business model, however, is the sourcing of digital content to third-party
mobile application developers, which is the focus of this paper.
There has been increasing interest in the concept of business models as a means of abstracting the real world and
understanding the potential for economic transformation (Haslam, Andersson, Tsitsianis, & Yin, 2013). This interest has
emerged in the last decade or so as digital technologies and innovations have challenged more traditional sectors such as
the music and newspaper industries (Ihlström Eriksson, Kalling, Åkesson, & Fredberg, 2008). Fundamental questions have
been raised concerning how ‘new economy business models’ (Lazonick, 2009) capture and generate value from delivering
services to users/consumers. Despite this rising interest, scholars cannot agree on exactly what constitutes a business model

∗ Corresponding author. Tel.: +44 1612750442.

E-mail addresses: Birgitta.Bergvall-Kareborn@ltu.se (B. Bergvall-Kåreborn), Debra.Howcroft@mbs.ac.uk (D. Howcroft).

0155-9982/$ – see front matter © 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.accfor.2013.06.001
 Author's personal copy

B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289 281

beyond recognizing that it represents a new unit of analysis that aims to explain firms’ business success (Zott, Amit, &
Massa, 2010). While this approach, which usefully seeks to explain both value creation and value capture (see Chesborough,
2006), has merit, it nevertheless lacks the theoretical tools to enable an in-depth analysis of the connections between
globalizing processes, as embodied in the production networks of large firms. In seeking an approach that offers strong
explanatory power, a range of conceptualizations have been devised regarding how economic activities are coordinated
and how production is organized using long chains or networks (e.g., Dicken, Kelley, Olds, & Yeung, 2001; Gereffi, 1994).
This has led to a body of research consisting of three interlinked strands, each offering rich case studies of international
production networks and providing a grounded way to examine globalization in situ and interrogate how power is exercised
in global industries (Bair, 2005). A number of variants that fall under the rubric of network/chain approaches, which include
Global Commodity Chain (GCC) (Gereffi, 1994), Global Value Chain (GVC) (Gereffi, Humphrey, & Sturgeon, 2005) and Global
Production Network (GPN) (Henderson, Dicken, Hess, Coe, & Yeung, 2002), provide the conceptual apparatus to support
more detailed analyses of significant aspects of transnational firms, such as Apple. In this paper, we will draw upon the GPN
perspective to inform our analysis.
Our aim is to emphasize the labor dimension of the Apple business model by extending the more predominant focus
on manufacturing labor to high-tech labor and by introducing the concept of crowdsourcing to aid our understanding of
this emerging area. Our interest lies in analyzing the interconnections between Apple as the lead firm and the multitude
of applications suppliers that provide digital content. We detail the role of the crowdsourced labor force that provides
digital content as an important and significant contributor to the Apple business model in relation to value capture and
enhancement, while noting glaring power asymmetries and strong network embeddedness. The paper begins by discussing
the various network perspectives and then outlines the evolution of mobile applications development and distribution
(MADD), situating this emerging phenomenon within the context of the IT industry more broadly. Section four provides an
overview of the research methodology, and section five details the empirical observations of the study. Data are analyzed
using the GPN framework, with the focus on value creation, power asymmetries, and embeddedness. Finally, conclusions
are drawn.

2. Networks and chains

In the diverse frameworks that comprise network/chain approaches, the literature is eclectic and its distinct intellectual
positioning (with GCCs from Organizational Sociology, GVCs from International Business, and GPNs from Economic Geogra-
phy) is reflected in the different terminology employed (chain or network metaphors), the different levels of analysis, and
the intended audience (GCC and GVC, with their focus on upgrading activities, are far more policy-oriented) (Bair, 2005).
Despite these differences, the three approaches constitute a loosely integrated tradition, and research carried out under the
banner of GPN is not substantially different from that within the GCC tradition (Levy, 2008). Indeed, it has been argued that
each perspective has its own strengths and that all three might be better viewed as complementary rather than contending
paradigms, given that these approaches share a common interest in ‘making visible the structured connections to organize
the global economy’ (Bair, 2008: 359).
Drawing on various elements of GCC and GVC research, the GPN approach provides a more expansive picture. According
to Coe, Hess, Wai-Chung, Dicken, and Henderson (2004: 471), GPN allows us to appreciate ‘the globally organized nexus
of interconnected functions and operations by firms and non-firm institutions through which goods and services are pro-
duced and distributed.’ It aims to understand the connections between globalizing processes as embodied in the production
networks of transnationals and regional development in specific territorial formations. In this regard, GPNs should be viewed
as contested fields, consisting not only of firms but also of a diversity of actors and institutions, each with their own interests
(Levy, 2008).
The GPN framework provides three key conceptual categories: how value is created, enhanced and captured (which
is pivotal to understanding business models); how power is created and maintained within the production network; and
how agents and structures are embedded in particular territories. These three elements facilitate an understanding of the
Apple business model, enabling a conceptualization of the production network yet crucially going beyond more traditional
business model analysis given the focus on power and embeddedness. A specifically network focus reveals the complex
circulation of capital, knowledge and people that underlies the production of goods and services, and it acknowledges the
multiple linkages and feedback loops that are entailed in processes of value capture and creation (Coe, Dicken, & Hess, 2008).
Adopting a GPN perspective recognizes the dynamic nature of production networks, which are in a permanent state of flux.
Such an approach emphasizes the interdependencies within production networks, enabling us to hone in on issues of control
and coordination, and illuminates the processes of network governance and the fluidity of the power relationships that exist
between different actors (Cumbers, Nativel, & Routledge, 2008).
Although GPN enables us to understand inter-firm networks in the context of globalization, a crucial element that is
notably absent from the literature is labor, which is simply viewed as a commodity and assumed to be intrinsic to the
production process (Coe et al., 2008; Cumbers et al., 2008). In its original formulation, the commodity chain construct
recognized the importance of labor, but over time it has become increasingly neglected (Bair, 2005; Levy, 2008). As Cumbers
et al. (2008: 372) note, ultimately, GPNs are ‘networks of embodied labor’ that are embroiled within particular geographies
of work and employment, yet the centrality of labor is rarely acknowledged. Indeed, understanding evolving labor–capital
relations is vital to the development of GPNs, and researchers argue that investigating how labor may co-determine processes
 Author's personal copy

282 B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289

of capitalist development should be placed at the center of GPN analysis (Rainnie, Herod, & McGrath-Champ, 2011; Selwyn,
2012). Given this lacuna in much of the current GPN literature, the labor dimension will be at the forefront of this study.

3. The Apple platform and the evolution of mobile applications development and distribution

Historically, computers as programmable machines offered a flexible division between hardware and software, as wit-
nessed in the development of distinct hardware manufacturing and software industries. Intense competition and innovation
has seen digital giants such as IBM, Cisco, and Intel, providers of computers and peripherals, being overshadowed by new
players such as Google, Facebook, and Twitter, companies that specialize in the provision of software, applications, services,
and communications technology. In contrast to the traditional separation of hardware and software expertise, the Apple
business model is based on the interconnection of both elements. Although closely coupled, hardware and software develop-
ment involves distinct global sourcing strategies based on how value is captured and created in diverse local environments.
Hardware production networks are built on the assembly of tangibles and are based on a low-cost manufacturing model that
involves outsourcing to developing economies, with Taiwan and China emerging as leading assembly sites. By contrast, soft-
ware development requires the creation of intangible products – which are constrained by the hardware within which they
are situated – and is centered on a highly skilled, technical workforce that is predominantly based in Western economies.
Apple’s product range includes the iPhone, iPod, iPad, iMac and Apple TV, which are supported by a variety of services,
including the sale of digital content and applications through the App store, iTunes, and iBookstore. In contrast with their
checkered business history, Apple has capitalized on recent product launches, which, despite litigation claims over patenting
with HTC, provide first mover advantage. Such is the success of these products and services that Apple now elevates mobile
communication devices above their personal computer offerings. Yet, as the organizing logic of digital innovation illustrates,
this market has not yet achieved stabilization or saturation because technological adoption is notoriously difficult to predict.
The combination of product innovation along with digital content and services has been complemented by the grow-
ing importance of proprietary platforms and ecosystems (Cusumano, 2010). While Apple continues developing high-end
innovative products, much of its enhanced market share can be attributed to the embedding of these artifacts into a central-
ized and integrated digital ecosystem that seamlessly links products with the electronic marketplace. Apple’s inroad into
the mobile market saw the emergence of a business model centered on platform-based digital ecosystems that function
like markets and are designed to coordinate supply and demand. This fusing of technology, services, and facilities into a
digital ecosystem is regarded as ‘greater than the sum of its parts’ (Cusumano & Gawer, 2002), and in this respect can be
described as generative. This generativity can be partly attributed to the ways in which the platform leverages the expertise
of a diverse developer community, which constitutes the supply-side of digital content and services. Such is the success of
this combination of products, platform, digital content, and online services that Apple’s financial profile has been described
as ‘a phoenix rising from the ashes’ (Haslam et al., 2013: 64). Apple’s evolving business model has led its CEO, Tim Cook,
to suggest that we have entered a ‘post-PC world,’ evidenced in sales of devices such as the iPad, iPhone and iPod, which
accounted for 76% of Apple’s revenue in 2011 (Naughton, 2012).
In terms of digital content production, it was not until the launch of the iPhone in 2007 that the market for mobile
applications opened up to third-party developers willing to provide applications and services. Previously, only a limited
number of applications that were largely supplied by handset manufacturers were available. Apple unveiled its platform in
2008 and released the Software Development Kit (SDK), allowing developers to create applications, initially for the iPhone.
Apple sets the parameters for the development environment, and its reputation for tight corporate control and high levels
of centralization (Cusumano, 2010; Dedrick, Kraemer, & Linden, 2009) is evident in platform construction and coordination.
They exert censorship over the development process, as their SDK determines precisely what type of software functionality
can be made publicly available. For example, applications cannot deploy competing platforms, such as Adobe Flash, the
most common technology for handling video on internet. In 2010 Apple bolstered its control with the release of 113 review
guidelines covering technical information, privacy, religion, sex, trademarks, and more (Apple, 2010), which determine
which applications will be available for general release. The distribution channel is mediated by Apple, which can halt an
application’s release if it is deemed inappropriate or unsuitable.
Since the inception of the App Store in 2008, more than 775,000 apps have been made available with more than forty
billion downloads (Apple, 2013). The App Store provides developers with a link to users; they set their own price for the
application and retain 70% of sales and in-app advertising revenues. In January 2013, developers had earned more than $7
billion from app downloads which, given that Apple takes 30% of revenues, equates to around $3 billion for Apple (Apple,
2013). These figures translate into developers receiving an average of 17.5 cents per app download, which includes all in-
app purchases and revenues. When these transactions are combined, the figures are substantial: quoting a ‘typical day’ in
November 2012, revenues in the App Store generated in excess of $15M, although there is considerable clustering, with
seven applications accounting for 10% of revenue (Distimo, 2012).
For consumers, the appeal of Apple’s hardware devices is closely linked with the variety of online content and services
that are available for them. This market requires a continuous stream of innovation to sustain consumer interest. In opening
up the platform to third-party developers, Apple has outsourced some of its software development to a global base of
freelancers, thereby minimizing its own risk while developers create applications that may or may not be successful. This
particular form of sourcing has been termed ‘crowdsourcing’ (Brabham, 2008), which has been described by Business Week
(2006) as a novel way of ‘milking the masses for inspiration.’ Crowdsourcing takes place when a company leverages the
 Author's personal copy

B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289 283

Table 1
Number and type of interviews.

ID no. Developers Date Residence Format

1 1 iPhone June 2009 Nov 2012 UK Skype interview

2 1 iPhone June 2009 UK Face-to-face focus group
3–9 7 iPhone Sept 2009 USA Online forum
10–11 2 iPhone Sept 2009 USA Online forum
12–13 2 iPhone Aug 2010 Sweden Face-to-face focus group
14 1 Apple Sept 2009 UK Face-to-face interview
15 1 Apple Sept 2009 UK Face-to-face interview
16–17 2 Apple Sept 2009 UK Face-to-face focus group
18 1 Apple Sept 2009 UK Face-to-face interview
19 1 Apple Sept 2009 UK Face-to-face interview
20–21 2 Apple Sept 2009 UK Face-to-face focus group
22 1 Apple Sept 2009 UK Skype interview

crowd to contribute labor that could alternatively be performed by employees or paid contractors. This usually takes the
form of an open call over the Internet, and in the case of Apple, the call is restricted to registered members of the platform.
While there are no contractual obligations regarding platform members’ productivity, Apple has constructed particular rules
of engagement. Crowdsourcing generally draws upon the abilities and competences of the many, as opposed to a specialized
few, expanding the boundaries of the firm to harness expertise on an unprecedented scale (Tiwana, Konsynskil, & Bush,
2010). Crowdsourcing labor is not necessarily free (see, for example, Mechanical Turk or Vworker.com), although the costs
are substantially less than those associated with more traditional forms of employment (Kleeman, VoB, & Reider, 2008).
However, in Apple’s case, there is no direct remuneration provided for the development and supply of mobile applications;
instead, the development costs are borne entirely by the developers themselves.

4. Researching mobile applications development

In 2009, a qualitative study of developers’ experiences of MADD was undertaken. The research was part of a larger project
that focused on how market relations interact with, shape, and control developers’ experiences and expectations. The study
covered Sweden, the UK, and the US because these countries have significant levels of maturity in the mobile marketplace,
and it included both Apple and Google developers, with the former being the focus of this paper. We aimed to capture
the everyday working experiences of developers with varying expertise and a mixture of employment contracts. Topics
discussed included working practices, reasons for developing for mobile devices, attraction to and experiences of particular
platforms, the development process, and distribution strategies. The study was piloted using a focus group, which provided
a vantage point from which to launch the broader study. In total, twenty-two Apple developers were recruited using social
media channels, including online forums, blogs, email messages, and Facebook. We adopted a mixture of face-to-face, co-
located interviews, synchronous Skype interviews, and asynchronous online discussion forums, depending on preferences
and geographical location (Table 1). Interviews lasted from one to two hours; all were recorded and transcribed.
Two online forums were created, which lasted for ten days with a question posted daily. Every participant answered
each question and often commented on other’s answers, thereby generating debate in a similar way to that of a focus group.
Given that the IT sector is characterized by a multitude of firm types, we opted not to study one organization, and in this
respect, the research is neither organizationally nor spatially bounded.
The process of data collection and analysis occurred dynamically and interactively as the data were input into a data
analysis tool (NVivo). The method of analysis was based on an ongoing iterative process of reflection to help identify concepts
and themes (Miles & Huberman, 1994). Initial findings were shared with participants and their comments confirmed and
elaborated the themes. The quotes have been selected from the full range of participants working on the Apple platform to
highlight the multiplicity of views.

4.1. The developers’ profile

The developers represented a fairly homogenous group with extensive platform knowledge. Overall, publishing experi-
ence spanned from one to forty-five applications, with around half of the developers having published between ten and forty.
There were differences in levels of success as the number of downloads for their most successful application ranged from over
1 M to just over 10,000, but there were examples of some applications receiving zero downloads. While this was relatively
uncommon, the level of unpredictability (either positive or negative) was more widespread, which points to the unstable
nature of app development. The amount of revenue generated also varied widely – from $150,000 from one application to
just $50 for a developer with six applications.
Some developers worked on outsourced applications, but the majority ‘owned’ the product they were developing. The
developers represented a diversity of employment types, often experiencing multiple types of employment simultaneously,
such as formal employment and freelancing in their leisure time, or freelancing and sub-contracting for a specific project.
More than half of the participants were self-employed, either working as contractors or managing their own start-up. Of
 Author's personal copy

284 B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289

interest is the small proportion of developers that are formally employed to develop apps compared with those that are
formally employed but develop apps as a side job, outside the boundaries of the firm. Even for the formally employed, the
sector predominantly consists of micro firms and an expectation of ‘enterprising’ behavior (Barrett, 2001).
Of the three geographical locations selected for the research, different regulatory frameworks govern employment con-
ditions and may result in variations (Christopherson, 2004). In the US, there was a prevalence of entrepreneurial contractors
(Batt, Christopherson, & Rightor, 2001). In Sweden, work is predominantly based on an employment-based professional
model, with full-time, permanent employees. However, there is an ongoing adjustment toward self-employment and micro
firms, with 98% of Swedish IT companies having less than 20 employees (Statistics Sweden, 2008). The UK sits mid-way
between these extremes with increasing emphasis being placed upon the growth of small firms and self-employment.
Despite these distinctions, there are common patterns across these economies, such as urban orientation, tension between
creativity and control, continuous re-skilling, and gender segmentation.

5. Findings from the study: the organization of mobile applications development and distribution

In this section, analysis of the fieldwork is presented using a GPN perspective. This covers the three conceptual categories
of value creation and enhancement, power, and embeddedness.

5.1. Capturing and creating value

Henderson et al.’s (2002) explication of GPNs suggests that firms are able to capture value from various sources, including
product and process technologies, inter-firm relationships, and brand-name prominence. Regarding the Apple business
model, the digital platform is crucial to value creation and acts as a conduit that steers the development process, while
the App store serves as a distribution channel through the online marketplace. According to Apple’s Annual Report (2011),
enhancing the platform is seen as central to its strategy because the provision of ‘a strong third-party software and peripherals
ecosystem’ supports the planned expansion of mobile devices. Apple’s recent resurgence can partly be attributed to its
transformation from a company that provides hardware products to a company with an expanding global platform consisting
of digital content (Cusumano, 2010).
Pivotal to value creation is Apple’s ability to draw on a crowdsourcing workforce. Employing software developers is costly
to firms, and controlling their productivity is notoriously difficult (Barrett, 2001; Marks & Huzzard, 2010). Apple is able to
significantly increase its proportion of value by avoiding the direct costs of software development, as risk is outsourced to
the developers themselves. Crowdsourcing mobile applications entails a move away from salaried forms of exchange within
an internal labor market to an external market of competing developers, thus allowing Apple to avoid the incurred costs of
the employment contract while profiting from the productivity of what is effectively a volunteer workforce. Interestingly,
in its Annual Report, Apple positions the provision of digital content by a crowdsourced workforce as a risk factor: ‘The
Company relies on third-party intellectual property and digital content, which may not be available to the Company on
commercially reasonable terms at all.’ Recognition of the centrality of externally provided digital content is as follows: ‘The
Company’s future performance depends in part on support from third-party software developers.’ Although the number
of apps currently available seems to imply that the supply of content from third-party developers can be depended upon,
averaging revenues of 17.5 cents per download may be unsustainable for developers in the long-term.
Ordinarily, labor is far less mobile than capital, which underlines the importance of place in production processes (see for
example, IT offshoring and the temporality of spatial advantages). Within the IT industry, high-skilled technical developers
have a tendency to gravitate toward clusters of activity (e.g., Silicon Valley, Amsterdam) (Gill, 2007; Saxenian, 1992), and
these clusters tend to materialize as high cost, city-based labor. While understanding the geographical role of a particular
node in a global production network remains important (Rainnie et al., 2011), what is of interest for Apple’s business model
is the way in which the platform operates as the node for organizing app development and distribution, thereby enabling
Apple to leverage labor from the crowd workforce, negating spatial restrictions and the costs associated with employing a
high-tech, urban labor force.
Apple creates additional value by skimming 30% of the price or in-app advertising revenue from each app that is purchased
or downloaded. Apple recommends pricing categories, which impose normative control to the extent that the majority of
applications sit within predefined (low-price) categories which then reflect customer expectations. Top-slicing 30% does
cause resentment, however:
I find it very unfair that 30% of my application bill goes to a company that had nothing to do with it. Apple gets the
money from the actual hardware [iPhone] and even the software [SDK] they created. When you develop apps this
makes the phone better, so Apple shouldn’t then be making money out of developers as well. (2)
Apple’s brand reputation, which combines slick product usability with high-end marketing, is significant in attracting
consumer demand. This in turn draws developers to the Apple platform in anticipation of potential earnings: ‘They are very
successful and their success means our success.’ For developers, the combination of product features, the online marketplace,
and promising consumer demand means that they are willing to invest their time and resources in developing apps:
 Author's personal copy

B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289 285

I am developing mobile applications on the iPhone platform because it has many future possibilities. Apple is con-
stantly adding new features and updates to their devices. The store provides access to a huge marketplace with a real
opportunity to make money. This opens up the opportunity to market to millions and millions of people. Because of
the AppStore and general hype I don’t think any other platform comes even close to the revenues you get from your
applications. The other platforms are generally missing one or more of those elements. (14)
For Apple, value creation also stems from its low-cost manufacturing model and high levels of profitability on hardware
products. For example, net sales in 2010 increased 52% compared with 2009 ($22.3B), with a further increase of 66% in 2011
($43B); the gross margin for 2009–2011 hovers at approximately 40%. For Apple, hardware and software are increasingly
interdependent and the growth of hardware sales is interlinked with the provision of software applications and services.
While Apple’s hardware products may be perceived as innovative, their value enhancement lies in the hosting of external
digital content. This is acknowledged by Apple: ‘The Company believes decisions by customers to purchase its hardware
products depend in part on the availability of third-party software applications and services. . .. If third-party software
applications and services cease to be developed and maintained for the Company’s products, customers may choose not to buy
the Company’s products’ (Apple’s, 2012: 13). Developers provide the intellectual labor and content, which, when aggregated,
has a combined value for Apple that is far higher than revenue generated. The platform facilitates access to digital content
through online stores, which operate as automated services with low costs and potentially high profit margins (Cusumano,
2010). Value enhancement is boosted as Apple uses the platform to steer third-party developers toward improving the
quality and sophistication of products through the publication of review guidelines and by wielding ultimate control over
whether an app is deemed acceptable for circulation via the App store.
In terms of the circulation processes through which the various nodes in the GPN are connected, logistics and the coordi-
nation of intricate operations remain of central importance (Coe et al., 2008). In terms of the Apple business model, a further
advantage of the digital platform is that it helps to alleviate the problem of logistics. Apps are available from the App Store,
which builds on the existing infrastructure of iTunes. iTunes is operational in approximately 120 countries with plans for
further expansion (Apple, 2012). Apple’s ability to develop efficient circulation processes within the GPN adds to its success
and enhances value creation. However, for developers, logistics is about far more than simple distribution. Although the App
Store serves as a delivery channel with access to consumers, one developer commented: ‘My opinion is that marketing is
pretty important. In all cases but the most extreme, if you just put your app on the store and sit, it will fall into the abyss’
(3). The importance of marketing was a recurring theme and various strategies were revealed (such as using social network
sites like Youtube, Twitter, and blogs to disseminate information), with one developer suggesting the following:
Both the Android market and Appstore are bad distribution channels. They yield something, but nothing sizable for
sure, not enough for you to get in touch with your customer base. Blogs and other means seem to be much more
valuable distribution channels. I think this is the Achilles heel of the mobile app space (10).
Market structures are such that generating interest from consumers is crucial, but given that the App Store offers limited
showcasing beyond the ‘top 100 lists,’ the responsibility for achieving visibility and generating downloads is one that is
undertaken by individual developers.

5.2. Power asymmetries: key actors and stakeholders

From a GPN perspective, power asymmetries arise when lead firms have an enhanced capacity to influence decisions and
resource allocations – vis a vis other firms in the network – decisively and consistently in their own interests (Henderson et al.,
2002). In the context of the IT industry, sectorial transformation has resulted in a bifurcation, with large firms consolidating
their position as the proportion of small firms increases, confirmed by studies in Australia (Barrett, 2001), Holland (Gill,
2007), Sweden (Sandberg et al., 2007), the UK (Marks & Huzzard, 2010), and the US (Batt et al., 2001). These adjustments
have resulted in shifting geographies and changing power relationships between actors.
For Apple, the boundaries between internalization and externalization of functions are in a continuous state of flux,
reconfiguring organizational boundaries as they expand third-party sourcing, while maintaining centralized control over
development and distribution within the network. Apple’s ability to increase its revenue is the outcome of power negotiations
with other actors and arises from its market position. It is this strong market position that attracts large number of developers
to Apple:
Apple. . .that’s where the market is. I can get the biggest bang for my buck, and rather than spend time porting to
additional platforms, I‘m focused on enhancing my apps and creating new ones for the Apple platform. (6)
However, actors’ power within the network is not simply about relative size and financial clout (Coe et al., 2008) but also
depends on the extent to which actors possess assets, the scarcity of these assets, and the extent to which the assets can
be controlled. Many developers are in a relatively weak negotiating position with Apple. The commodities being supplied
can be easily replaced, they often have a short shelf life, and there is a demand for continuous upgrades, with one developer
commenting: ‘Another app may come out that offers similar functionality, and the developer has to decide if they can still
compete, whether they need to change features, or just scrap the project’ (10). Consequently, price cutting occurs:
 Author's personal copy

286 B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289

The top 50 list is just flooded with 99cent applications. Some individual developers say that those prices are too low
to get any money, real money. But that’s not really Apple’s problem – it is the developers’ problem. (4)
Developers also exist within a crowded and highly competitive marketplace, making it difficult to gain a stronger bargain-
ing position in an environment that is fairly anonymous. While some may opt to work on another platform such as Android,
overall, they are relatively isolated in terms of network connectivity, occupying a peripheral position. Of particular concern
is the process whereby Apple ultimately decides whether applications are permitted in the App Store: ‘I have several apps
that have spent several months in the approval queue and still aren’t approved’ (16). A common theme centered around ‘the
slow and terribly inconsistent app review process’ (8), with one developer remarking on his irritation over Apple’s ability to
curtail his creative freedom: ‘I have had to remove features to get an app approved, and the result is less than ideal. . . the
app is less attractive’(20).
When working in an uncertain market where the future strategy of Apple is undisclosed, maximizing revenue is key to
survival. However, some developers offered their application for free to encourage downloads and stimulate interest. The
extent of this practice is evidenced in figures suggesting that at any one time, around one-third of applications are available
for free (Distimo, 2011a). However:
Freebies happen in other industries as well, but the difference is that for most industries the free sample is the same
as the paid and it is a small sample that runs out, such as shampoo. Here, the free version is often so good that it stands
on its own, it does not run out, have a time limitation, and so it drives up the expectations on the paid app. (18)
GPNs are embedded within multi-scalar regulatory systems (Coe et al., 2008), and their operations can become more
seamless if codifiable standards that enable the lead firm to establish dominant forms of governance are created. The varieties
of different geographical and institutional contexts shape labor conditions and often play a key role affecting decisions
regarding where to locate. In the case of the Apple business model, drawing on crowdsourced labor means that these
regulations are less relevant. However, of significance are the standards that govern the structure of the production network
comprised of the operation of the platform, including the SDK, the approval process, and the distribution mechanism, all of
which have been constructed by Apple. These standardizing initiatives have considerable impact in terms of the territories
or networks that are being covered. For example, in creating the App Store, Apple was able to build on the legal and financial
infrastructure of iTunes, thereby enhancing geographical spread (In December 2009, for example, paid applications for Apple
were available in 77 countries, whereas the figure for Android was 8).
When examining power relations, it is important to recognize the cyclical nature of the industry. While many developers
have a technical education, continuous competence development is necessary if they are to remain attractive in the jobs
market. A number of developers commented on the inadequacy of resources and support for iOS development, preferring to
look elsewhere instead: ‘I almost never use the Apple-provided resources. If I need help, I‘ll use Google, then iPhoneDevSDK,
then my fellow developer contacts’ (12). While wider social networks offer support for experienced developers, they never-
theless acknowledged the difficulties facing those starting out: ‘For beginners it might be daunting to find information. . . .
iOS development resources seem a bit scarce to me’ (15).
Apple is renowned for its extreme secrecy surrounding product launches, but given the interdependence of hardware and
software, developers need to quickly adapt when new products are released, amending their apps to ensure compatibility.
This lack of transparency is particularly problematic when future planning is required for larger projects:
Let’s say you write an application and it is going to take you six months, then you have to be targeting devices not as
they exist now but how they are going to exist in half a year’s time. If they [Apple] are not going to tell you how long
it is going to take to add that feature, or they are not even going to tell you what they are going to do within those six
months, it becomes very difficult to undertake a project with any sort of confidence (19).
Power differentials extend beyond the Apple’s opacity, as numerous developers remarked on their sense of powerlessness
and uncertainty in relation to Apple’s ability to influence their future:
I mean in a way they are kind of guardians, because they can make or break us. If they decide that they do not like us
anymore, and that they do not want to promote us, that would make a big difference in how much money we make.
They are very much custodians of their marketplace so you’ve got to be well behaved (1).
As GPN research informs us, networks are imbued with various types of power relationships that are not necessarily
unidirectional. The network can be comprised of actors that are involved in collaboration and cooperation as well as conflict
and competition. There are antagonisms between different sets of actors contingent on their positions in relation to the
processes of value capture (Cumbers et al., 2008). Prior to Apple’s incursion into the MADD market, there were limited
opportunities for developers to access this marketplace and so many viewed crowdsourcing as opening up opportunities.
As the following example shows, Apple is keen to nurture relationships with developers who possess the potential to create
popular apps:
In 2009 the GymFu application suddenly sold very well, making $10–20,000 per month or something. And the reason
it was so successful was that a person at Apple promoted us. Internally, the way it works is that they have a review
team and if any of the reviewers think that a new application is really good they escalate it to their managers. And
 Author's personal copy

B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289 287

then their managers review these nominated applications once a week or every few weeks and make a selection of
a few applications to be promoted on the front of the App store, on iTunes and sometimes also on the television. If
that sort of thing happens to you, you can imagine that it can be pretty intense. One of my friends’ companies was
featured, I believe, on the television ad for free apps, and I think they got between 50,000 and 100,000 downloads a
day. And the great thing with our relationship with Apple is that it’s very much a two way relationship. I mean we
speak with them about our development schedule and they recommend new features, ideas and approaches, and if
they do not like something we’ve done they will not approve it. I mean Apple want high quality products and we want
high quality products, so it is a little like a partnership (1).
The majority of developers, who occupy a peripheral position in the network, can help neutralize power differentials
by connecting with other developers in order to create a form of collective power. Developers generate work based on
respect and recognition from their occupational communities, and their future prospects become reliant on contacts. While
developers simply exist as the ‘crowd’ to Apple, developers themselves rely upon these communities for support in surviving
crowdsourcing. Social networks foster collegiality and enable developers to cope with highly fragmented labor markets while
being leveraged as a mechanism for work distribution.

5.3. The embeddedness of mobile applications

Regarding embeddedness, firms are influenced by the social and cultural context of particular forms of capitalism in their
country of origin (Henderson et al., 2002). Firms are also grounded in specific locations, both materially, in terms of fixed
assets and headquarters, and also in terms of less tangible aspects, such as their institutionalized and cultural practices.
While Apple is geographically extensive, its strong sense of identity is evidenced in their Annual Report: ‘The Company is a
California corporation.’ Apple is firmly anchored in Silicon Valley, and this territorial or societal embeddedness (Hess, 2004)
within a regional economy that is renowned for technological innovation remains an important influence. Silicon Valley is
also the birthplace of the ‘New Economy Business model’ (Lazonick, 2009), which is a way of organizing business enterprises
that has altered how people are employed, a process that initially affected workers in the US and then filtered through to
other regions. This mode of employment is characterized by volatile stock markets, unequal incomes, unstable employment,
the offshoring of high-skill jobs, and insecurity. This business model continues to function despite lack of commitment on
both sides of the employment relation: by firms no longer providing lifelong, stable careers and by the intensification of
the international mobility of high-tech labor. It is this shifting labor market that frames the sourcing of digital content to
third-party developers and arguably legitimizes this way of working.
Stressing the virtual aspect of the crowdsourced labor force is not intended to negate the spatial elements of MADD. As
the mobile apps market has become increasingly internationalized, cultural differences remain important considerations
for developers. The majority of apps originate in the US given that the iPhone and App Store were initially launched there,
and this region continues to dominate, with UK developers capitalizing on their cultural proximity. In 2012, of the ten
most profitable cross-store publishers among twenty of the largest countries for Apple (and Google), five were US-based
and three were European (Distimo, 2012). There are clear geographical distinctions regarding the popularity of apps; the
proportion of paid versus free apps; the popularity of in-app purchases; the proportion of apps that are regionally, rather
than internationally, targeted; and the average price. Much of this reflects economic levels within regions, as well as market
maturity (Distimo, 2011b). The Asian market is the fastest growing and is also most sensitized to regionally focused apps,
which could have implications for developers in the longer term. The distinction between markets was noted:
There are numerous App Stores and being top at one App Store doesn’t make you top on the others. There are eight
Master App Store (e.g., the US, Japan, the UK, Australia) and unless you get there, you won’t make money (7).
As actors become embedded within the network via the platform, there are high switching costs associated with changing
platforms, thereby creating lock-in and bolstering Apple’s market position. For consumers, lock-in occurs as they acquire a
wide range of complementary products for different functions, and the incompatibility of cross-platform devices solidifies
their brand allegiance. Equally for developers, there is a downside when faced with the prospect of transferring platforms,
as explained by one developer:
The domain for mobile apps presents unique needs and solutions. Screen real estate, processing power and data
abilities vary across each mobile device. A solution that works and looks good on an Apple or Android phone may not
port well to a Blackberry or other device. The effort to port these apps to new languages and devices could be as much
as the effort in developing a new application (9).
Ordinarily, commitment to a particular location plays an important role in value capture, creation, and enhancement, but
Apple and its evolving digital platform display high levels of network embeddedness. The platform facilitates the organization
of different actors across the network and links products, services, content, and gateways to markets, thereby creating and
enhancing value. Typically, strong network embeddedness arises when a process of trust building occurs between the
different actors (Henderson et al., 2002). In the case of Apple, the 500 million active accounts on the App Store and the
significant number of developers supplying products, means that their central position of control is one that remains at
a distance. Entrenched network embeddedness does not necessarily arise from a position of trust, but from necessity (in
 Author's personal copy

288 B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289

terms of the labor market) and expectation as the suppliers of digital content wager on Apple’s continuing success. Building
a trusting relationship takes place in an environment of power relations, and as discussed previously, it is in the interest of
Apple to foster high levels of network embeddedness while wielding maximum control.

6. Conclusion

The aim of this paper has been to apply a GPN analysis to Apple, with a particular focus on the external sourcing of digital
content. Providing detail on Apple and the evolution and operation of its platform facilitates insights into the emerging
business model. Applying the GPN framework to the empirical findings allows us to show the value of adding labor to our
understanding of both GPNs and business models on a general level. Moreover, we offer a counterpoint to the populist hyper-
bole that quite rightly frames Apple’s manufacturing operations negatively, yet remains optimistic about crowdsourcing
digital content, which is seen by many as offering access to a slice of the success of Apple’s business model.
The power base within the mobile industry has adjusted over a relatively short period of time, with Apple becoming one
of the major firms that has risen to prominence. They control a centralized digital platform for development and distribution,
constructing a circuit of production whereby micro companies and individual developers create products and market them in
vertically disintegrated systems. Apple’s success can be attributed to various interrelated elements: the adaptation of mobile
phones into internet-enabled devices; enhanced content-driven functionality arising from a multitude of applications; Apple’s
brand reputation and infrastructure; and the success of crowdsourcing. Although these changes are aided by technology
platforms, it is not pre-determined that technology per se will influence developments in any one specific way. It is the
combination of technology, firm strategies, and regulatory context that enables technology to steer change along a particular
course. The distinctive aspect of this buyer-seller network is the centralization of control via the platform, which provides
the gateway to consumers while leveraging the crowd to boost capital. Developers shoulder the burden of costs while Apple
circumvents the investment and resources required for in-house product development and marketing. This is the essence
of crowdsourcing, as corporations are able to harness creative labor at little or no cost while minimizing risk.
By conceptualizing the Apple business model in GPN terms, it has been possible to examine how and by whom value
is captured at various stages of the production network, thus highlighting how development and distribution is controlled
by Apple. The platform enables the weaving together of artifacts with a multitude of content, which, when combined,
considerably enhances value. Our exploration of the nature of the relationships between the various actors reveals glaring
power asymmetries, with Apple maintaining centralized control and keeping a tight grip on the network of development
and distribution. These shifts are reflective of wider sectorial trends, as the increasing domination of multinational firms like
Apple further limits the potential for smaller firms to gain a foothold in the industry. Strong ties and network embeddedness
help solidify Apple’s dominance, as both consumers and third-party developers become increasing locked into the Apple
platform. Placing the strengthening power base of Apple in the broader context of the widespread adoption of mobile devices
implies increasing restrictions for both consumers and developers.

References

Apple (2010) App Review, available at: https://developer.apple.com/appstore/guidelines.html

Apple. (2012). Annual report, filed 31/10/12.
Apple. (2013). Apple press info: App store tops 40 billion downloads with almost half in 2012. , available at:. http://www.apple.com/pr/library/2013/01/07App-
Store-Tops-40-Billion-Downloads-with-Almost-Half-in-2012.html
Bair, J. (2005). Global capitalism and commodity chains: Looking back, going forward. Competition & Change, 9(2), 153–180.
Bair, J. (2008). Analysing global economic organization: Embedded networks and global chains compared. Economy and Society, 37(3), 339–364.
Barrett, R. (2001). Labouring under an illusion? The labour process of software development in the Australian information industry. New Technology, Work
and Employment, 16(1), 18–34.
Batt, R., Christopherson, S., Rightor, N., & van Jaarsvald, D. (2001). Networking: Work patterns and workforce policies for the new media industry. Washington:
Economic Policy Institute.
Brabham, D. (2008). Crowdsourcing as a Model for Problem Solving. Convergence: The International Journal of Research into New Media Technologies, 14(1),
75–90.
Business Week. (2006). Milk the masses for inspiration. Hempel, J., 2509096, 38–39.
Chesborough, H. (2006). Open business models. Boston, USA: Harvard Business School Press.
Christopherson, S. (2004). The divergent worlds of new media: How policy shapes work in the creative economy. Review of Policy Research, 21(4), 543–558.
Coe, N., Hess, M., Wai-Chung, H., Dicken, P., & Henderson, J. (2004). Globalising regional development. Transactions of Institute of British Geographers, 29,
464–484.
Coe, N., Dicken, P., & Hess, M. (2008). Global production networks: Realising the potential. Journal of Economic Geography, 8, 271–295.
Cumbers, A., Nativel, C., & Routledge, P. (2008). Labour agency and union positionalities inglobal in global production networks. Journal of Economic
Geography, 8, 369–387.
Cusumano, M. (2010). Platforms and Services: Understanding the resurgence of Apple. Communications of the ACM, 53(10), 22–24.
Cusumano, M., & Gawer, A. (2002). The elements of platform leadership. MIT Sloan Management Review, Spring, 51–58.
Dedrick, J., Kraemer, K., & Linden, G. (2009). Who profits from innovation in global value chains?: A study of the iPod and notebook PCs. In Industrial and
Corporate Change June, (pp. 1–36).
Dicken, P., Kelley, P. F., Olds, K., & Yeung, H. (2001). Chains and networks, territories and scales: Towards a relational framework for analysing the global
economy. Global Networks, 1(2), 89–112.
Froud, J., Johal, S., Leaver, A., & Williams, K. (2012). Apple Business Model: Financialization across the Pacific. In CRESC Working Paper Series No.111. , available
at:. http://www.cresc.ac.uk/sites/default/files/WP111%20Apple%20Business%20Model%20(April%202012).pdf
Distimo. (2011a). The battle for the most content and the emerging tablet market.
Distimo. (2011b). App distribution becomes a global game: The shift of power and impact for developers., available at: http://www.distimo.com/blog/2011
06 app-distribution-becomes-a-global-game-the-shift-of-power-impact-for-developers/
 Author's personal copy

B. Bergvall-Kåreborn, D. Howcroft / Accounting Forum 37 (2013) 280–289 289

Distimo. (2012). Year in Review.

Gereffi, G. (1994). The organization of buyer-driven global commodity chains: How U.S. retailers shape overseas production networks. In G. Gereffi, & M.
Korzeniewicz (Eds.), Commodity chains and global capitalism. Westport, CT: Praege.
Gereffi, G., Humphrey, J., & Sturgeon, T. (2005). The governance of global value chains. Review of International Political Economy, 12(1), 78–104.
Gill, R. (2007). Technobohemians or the new cybertariat? Amsterdam: Institute of Network Cultures.
Haslam, C., Andersson, T., Tsitsianis, N., & Yin, Y. P. (2013). Redefining Business models: Strategies for a financialized World. London: Routledge.
Henderson, J., Dicken, P., Hess, M., Coe, N. M., & Yeung, H. W.-C. (2002). Global production networks and the analysis of economic development. Review of
International Political Economy, 9, 436–464.
Hess, M. (2004). ‘Spatial’ relationships? Towards a reconceptualization of embeddedness. Progress in Human Geography, 2(2), 165–186.
Ihlström Eriksson, C., Kalling, T., Åkesson, M., & Fredberg, T. (2008). Business Models for m-services—Exploring the e-newspaper case from a consumer
view. Journal of Electronic Commerce in Organizations, 6, 29–57.
Kleeman, F., VoB, G., & Reider, K. (2008). Un(der)paid innovators: The commercial utilization of consumer work through crowdsourcing, Science. Technology
and Innovation Studies, 4, 5–26.
Lazonick, W. (2009). Sustainable prosperity in the new economy? W.E. Upjohn Institute for Employment Research, Kalamazoo, Michigan.
Levy, D. (2008). Political contestation in global production networks. Academy of Management Review, 33(4), 943–963.
Marks, A., & Huzzard, T. (2010). Employability and the ICT worker: A study of employees in Scottish small businesses. New Technology, Work and Employment,
25(2), 167–181.
Miles, M. B., & Huberman, A. (1994). Qualitative data analysis: An expanded sourcebook. Beverley Hills: Sage.
Rainnie, A., Herod, A., & McGrath-Champ, S. (2011). Review and positions: Global production networks and labour. Competition and Change, 15(2), 155–169.
Sandberg, A., Augustsson, F., & Lintala, A. (2007). IT and telecom companies in Kista Science City, Northern Stockholm. Arbetsliv I Omvandling, 2007, 1.
Saxenian, A. (1992). Contrasting patterns of business organization in silicon valley. Environment and Planning D: Society and Space, 10.
Selwyn, B. (2012). Beyond firm-centrism: Re-integrating labour and capitalism into global commodity chain analysis. Journal of Economic Geography, 12,
205–226.
Statistics Sweden (SEB) (2008) available at: www.seb.se
Tiwana, A., Konsynskil, B., & Bush, A. (2010). Platform evolution: Coevolution of platform architecture, governance and environmental dynamics. Information
Systems Research, 21(4), 675–687.
Zott, C., Amit, R., & Massa, L. (2010). The business model: Recent developments and future research. Journal of Management Research, 37(4), 1019–1042.

View publication stats