An Exploration of Networks in Value Cocreation - A Service-Ecosystems View

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AN EXPLORATION OF NETWORKS

IN VALUE COCREATION:

A SERVICE-ECOSYSTEMS VIEW

Melissa Archpru Akaka, Stephen L. Vargo and

Robert F. Lusch

ABSTRACT

Purpose – The purpose of this essay is to explore further the concept of

value cocreation from a service-ecosystems view, by considering theimportance of networks and the configuration 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 valuecocreation because they influence 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, 13–50

Copyright r 2012 by Emerald Group Publishing LimitedAll rights of reproduction in any form reserved

ISSN: 1548-6435/doi:10.1108/S1548-6435(2012)0000009006

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Research implications – This research suggests that value cocreation is acomplex 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, firms should consider the configurations of

relationships and resources to develop more compelling value proposi-

tions.

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; serviceecosystems; networks

INTRODUCTION

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 firms (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 partici-

pation and perspectives of multiple actors, including firms, customers,

and other stakeholders in value cocreation (Akaka & Chandler, 2011;

MELISSA ARCHPRU AKAKA ET AL.14



Vargo & Lusch, 2011a). The central aim of this essay is to contribute to adeeper understanding of how value is cocreated through the interaction of

multiple stakeholders in markets. To do this, we discuss a service-

dominant (S-D) logic, ecosystems view on value cocreation, and draw on

the literature on networks in marketing, and related fields, 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, afirm 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 benefit 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 specifically, service ecosystems are ‘‘relatively self-

contained self-adjusting systems of resource integrating actors connectedby 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 firm–customer 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 forothers (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

benefit – and the cocreation of value through complex, dynamic configura-

tions of mutually beneficial 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-in-

context. Thus, a service-ecosystems view of value cocreation not only

centers on value that is derived and determined in a particular context, butalso 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

An Exploration of Networks in Value Cocreation 15



(Lusch, Vargo, & Tanniru, 2010; Vargo & Lusch, 2008), which constitutethe 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 identified 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 tounderstand 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

configured and reconfigured to mobilize resources and make them moreaccessible 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 influence, 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 cocreationand elaborate an S-D logic, ecosystems view to provide a framework for

conceptualizing how value is created through dynamic and mutually

beneficial 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 configurations in

value cocreation. We then elaborate on how interaction in networks drives

value cocreation and the formation service ecosystems. Based on this, weargue 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, firms can develop more




compelling value propositions by (re)configuring relationships and resourcesand 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.

VALUE COCREATION

Conventional models of value creation depict a firm’s production of anoffering, which is embedded with value for a customer to consume. Such

models limit the understanding of value creation to the firm’s production

and operational activities and conceptualize value based on the output of

the firm (e.g., Porter, 1985). Four major issues arise when observing

complex processes of exchange within a firm-centered framework: (1) the

process of value creation is centered on firm 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 theproduction 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 firms, 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 firm and suggests that

value is not created by a firm’s 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

firm–customer dyad, Payne, Storbacka, and Frow (2008, p. 94) argue for




more attention to be paid toward ‘‘the role of non-supplier partners andintermediaries 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 configurations in value cocreation also has recently

emerged (Akaka & Chandler, 2010; Chandler & Vargo, 2011; Chandler &Wieland, 2010). This research suggests that the configuration of networks

influences 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 inmarketing as they relate to the main components of value cocreation –

exchange, relationships, resources and value.

SERVICE ECOSYSTEMS

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 conventionalviews 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-ecosystemsapproach 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




this perspective, value cocreation occurs through the integration of resources, mediated by reciprocal exchange encounters and shared institu-

tions 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 influence and are influenced 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-to-

one 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 thefundamental 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 manage-

ment has traditionally been studied under the perspective of the firm, theunderstanding 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 variouslevels of any given exchange system, and, thus, is highly relational. In this

view, exchange encounters are nested within a host of networked relation-

ships (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 firm over time (for detailed review of relationship

marketing, see Vargo, 2009). However, this focus on customer–firm

exchange encounters neglects the variety of interactions that occur among

other stakeholders that potentially influence or are influenced 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 infinite (Vargo &

Lusch, 2011a). In this view, discrete, money-for-goods exchange transac-

tions 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 intersect-ing 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 acrossmodules 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




influenced by ‘‘transactions’’ and the drivers of those relationships areneeded.

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 never-

ending interaction and interconnected relationships in value cocreation and

argues that ‘‘there are no ‘final’ customers in this emerging framework.’’

Thus, this ecosystems view of relationships suggests that value is cocreatedthrough 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 identifiestwo 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 thedelivery 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 influenced 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 thatactors 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




system’s applied operant resources (service) with those of other systems. Wecan consider individuals, groups, organizations, firms and governments to

be service systems if they can take action, apply resources, and work with

others in mutually beneficial 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 firms 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 onresources accessed through exchange among actors but also integrates those

resources that are part of a broader social context. Moreover, a service-

ecosystems 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 firm’s 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 firm’s 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




of ‘‘value-in-context’’ to explicate the contextual nature of value-in-use andargue 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,

firms, families, countries).’’

It is important to note that by focusing on value-in-use, or value-in-

context, 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) arguethat value-in-exchange could not exist without the presence of value-in-

context, 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 financial feedback to the

firm. Vargo and Lusch (2006, p. 49) explain that ‘‘when a firm sells its

service (with or without a tangible good), it receives a monetary instru-

ment (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 feed-back mechanism for firms, 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 therecursive 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 valuecocreation. 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 influence and are influenced by value cocreation, or processes by

which value is collaboratively created.

NETWORKS IN MARKETS AND MARKETING

A number of value cocreation studies focus on the relationship between a

firm 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 firm and its customers, suppliers and other

‘‘network partners.’’ Moreover, S-D logic’s 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 customer’s ability to integrate

knowledge and skills and cocreate value is dependent on existing internalcompetences 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 firm–

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 firm’s 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 frameworkfor conceptualizing service ecosystems must be flexible 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 influences

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 asmeso and macro levels (Chandler & Vargo, 2011).

Lusch and Vargo (2006a, p. 285) propose the integration of network-

related research for examining value cocreation by suggesting that ‘‘much




could be gained in the elaboration and extension of S-D logic from a moreexplicit 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 avariety 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 first 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 buyer–seller relationships. Fordand 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 interactiveenvironment, the process or flow 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 marketingby 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 firms. 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 firms make up ‘‘value constel-

lations,’’ which are linked through patterns that create innovative busi-nesses and/or change the way value is created. Value constellations are not

merely a reallocation of activities or outsourced functions of the firm;

rather they are a coordinated group of activities and/or firms that cons-

truct an innovative, nontraditional output.

In line with Normann’s (2001) focus on value creation in constellations,

business ‘‘nets’’ have been introduced as relationships designed to develop

specific solutions to sometimes temporal, rather than long-term problems or

operational activities (Moller & Svahn, 2006). Nets rely on knowledge

sharing and value cocreation among firms, with the understanding that theend customer ultimately determines value. Notably, Moller and Svahn

(2006, pp. 988–989) 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 codification 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 ‘‘codification’’ of knowledge suggests that through the process of

transferring information throughout networks, the determination of what isand 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 opinionsand personal experiences that affect demand and reverse the traditional

firm-to-customer flow of marketing communications. In this way, customers

not only contribute to the value created for themselves but, through their




interactions, also create new meanings associated with firms’ valuepropositions. 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 identi-

fication, differentiation, and interaction (Peppers et al., 1999) and recon-

siders the dyadic relationship between a firm and a customer in the contextof the wider market. Gummesson’s 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-to-

consumer 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 themarket 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). Bagozzi’s

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 firm and

customer or B2C relationships. In addition, the study of networks also

points toward interactions that occur beyond the confines of an exchangeencounter. Grannovetter (1985, pp. 495–496) 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 onesy business relations spill over into

sociability and vice versay it is not only at top levels that firms 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 anexchange is derived from both economic and social benefit.

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 aspectsywe 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) narrowthis 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 extensivey

resources connected do not only follow the exchange of

resources. The resource layer is more tacit and more difficult to completely codify. The

firm’s ability to realize a product’s 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 firm




is part of. The value of a specific 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-for-

service 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 unifies 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 firms and other economic actors is the determining factor of the valuethat 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 anactor 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,

specifically 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 actor’s own physical, financial, human and technological resources form the

basis for its operationsy [but] it is only through interaction that the actor’s resources

can be transformed into capabilities that are of value to others and hence form a basis

for interdependencey secondly, it is through interaction that the existing resources of

other actors can be activated as counterparts to an actor’s own resources. (p. 14)

Along those lines, Ford, Gadde, Hakansson, and Snehota (2002, p. 2)

discuss the importance of networks for accessing needed resources byexplaining 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 require-

ments.’’ 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 satisfied), it is likely

that the exchange will be repeated. If one, or both, of the partners is not

satisfied, the process of collecting information, negotiating value-in-

exchange and assimilating and transferring knowledge will begin again.

The consideration of value cocreation through networks of relationshipsemphasizes 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,




knowledge is shared and new knowledge is created and thus theinterconnected actors are always learning (Lusch et al., 2010).

‘‘Consequently, a resource that is exchanged contains the combinations of

several resourcesy 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 newknowledge 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 firm 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 firms’ value propositions. The difficulties in generating andtransferring 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 beneficial nature of

relationships in markets and emphasizes the importance of a firm’sdevelopment of a value proposition. This is because, in this view, firms

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 customer’s 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) elaborateson 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 acustomer.

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 firms, customers, and other stakeholders. Import-

antly, this view of an experience network emphasizes the role of firms inconstructing 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 networkand 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 actor’s 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 itis 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 configuration of the value-creating system

can compress and actually ‘‘create’’ time. This is done by implementing theprinciple of density, which Normann and Ramirez (1993, p. 69) define 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




own value-creation.’’ If a combination of resources is effectively mobilizedfor a specific 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 firms should focus on their ability to

break up or ‘‘unbundle’’ resources and put together or ‘‘rebundle’’ available

offerings. He explains how an actor’s utilization of an asset is not isolated orfocused solely on the present; it is assimilated with surrounding resources

and includes considerations of future benefit 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 fits into a context of future

production and value creationy [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 valuecocreation and nature of the context through which value is created.

NETWORKS OF RELATIONSHIPS AND

RESOURCES IN SERVICE ECOSYSTEMS

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, thecontext 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 influence, but are also influenced by, value cocreation and exchange

(Vargo & Lusch, 2011b). In this view, processes of value cocreation draw on

social contexts as operant resources – those that influence 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 formationof social contexts (composed of relationships and resources) via contextua-

lization (Chandler & Vargo, 2011) or institutionalization (Edvardsson et al.,

2011) processes as well. Table 1 provides an overview of a service-ecosystems




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 logic’s ecosystems perspective of value cocreation recognizes that the

foundation of exchange is service – the application of knowledge and skills

for the benefit of another – but service exchange occurs among a variety of

social and economic actors. The literature on networks in marketingexplicates the variety of actors in networks, which includes B2B, B2C, and

C2C interactions. This work provides evidence of Vargo and Lusch’s

(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 theprimacy 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 logic’s focus on the experiential and phenomenologicalnature 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

Table 1. Developing the Concept of Value Cocreation.Components of Value

Cocreation

Service Ecosystems Networks of Relationships and

Resources

Exchange Systems of service

exchange

Multiple actors in networks

Relationships Dynamic and nested

relationships

Embeddedness of exchange

relationships

Resources Resource integration Incomplete resources and networks

Value Value-in-context Experience networks and density




surrounding network (Prahalad & Ramaswamy, 2004). Thus, in this service-ecosystem, network-centered view, the cocreation of value depends on an

actor’s ability to access, adapt, and integrate resources, which is largely

influenced 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 bynetworks of interconnected relationships in three ways: (1) networks enable

actors to access resources through the development of exchange relation-

ships, (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 serviceecosystems and the process by which value-in-context is collaboratively

created, through the access, adaption, and integration of resources among

multiple actors such as firms 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 firm’s production and units of output, to

Co-creating Value-in-Context

Access, Adapt and Integrate Resources Access, Adapt and Integrate Resources

Co-creating Value-in-Context

Employees

Suppliers (Firm)(Customer)

Reference

Groups

Employer

Other

Firms

Derived Value Derived Value

Value Proposition/Money

Stock-

holders

Actor1Actor2

Value-in-Context

Value-in-Exchange

Value-in-Context

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 andeconomic actors, within a broad social context. In this value cocreation

framework, exchange is conducted in order to render service with the

intention of bettering one’s circumstances through value-in-use, in a

particular context. Because value-in-use is determined through the integra-

tion 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 (assort-

ments). 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 fit 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 becreated. 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 Adapt Integrate

Attain Resources via

Relationships in Network

Fit of Resources with

Available Assortment

Fit of Resources in Unique

Context

Fig. 2. Cocreating Value-in-Context.




feedback to the system and improve or make changes in order to increasetheir abilities to cocreate value in the future.

The consideration of the social context that influences and is influenced 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 firms, 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 firms can increase the accessibility, adaptability, andintegrability of resources by (re)configuring networks. A number of research

questions are presented for furthering the research on how networks of

relationships and resources influence value cocreation and drive the

reformation of social contexts that frame exchange.

(RE)CONFIGURING RELATIONSHIPS AND

RESOURCES: DEVELOPING COMPELLINGVALUE PROPOSITIONS

The value cocreation framework presented above emphasizes the value

derivation or realization process by centering on a concept of value-in-

context, which is not limited to the current benefits 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 areassociated with a number of interactions and relationships. Thus, every

customer experience is unique based on a distinct collaboration of relation-

ships 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 five

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,




firms develop more compelling value propositions as they increase theability of customers, as well as other stakeholders, to access operant and

operand resources, adapt resources with a specified assortment, and

integrate resources in micro-level daily experiences as well as macro-level

social contexts. In a network of relationships and resources, the combina-

tions 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 configuration of anactor’s surrounding network of relationships ultimately influences 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 influenced by the shape

of the network and norms and meanings that guide interaction among

participating social and economic actors. Because social contexts differ, thevalue determined through use and context is heterogeneous in nature, and

value cocreation relies highly on the quality of an actor’s surrounding

network. The conditions of networks, within service ecosystems, are

influenced by their configurations and ability to provide access to operant

(and operand) resources when and where they are needed – meeting time/

space/actor specifications. The configuration of each actor’s network of

relationships and resources influences that actor’s accessibility to necessary

resources and impacts the adaptability and integrability of resources

accessed through exchange (Normann, 2001). Thus, to develop compellingvalue propositions, firms must increase the accessibility, adaptability, and

integrability of its offerings. This can be done by (re)configuring relation-

ships 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 influence the sharing of knowledgeand 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 actor’s surrounding network. In this




view, the main role of marketing is to develop or configure relationshipsamong firms, customers, and other stakeholders from which customers or

service beneficiaries 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 configuring relationships to increase accessibility of a value proposition

are: How do differences in actors’ positions influence interaction amongactors? How do differences among actors and their relations influence 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 influence value cocreation,

Chandler and Wieland (2010) propose centrality, a useful way of conceptua-

lizing and measuring relationships in systems (Wasserman & Faust, 1994).

Wasserman and Faust (1994, p. 173) define a central actor as ‘‘one involved in

many ties.’’ Thus, centrality is a property of an actor’s position – the particularset 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 actor’s

centrality in a network and its contribution to the interaction in that

system can provide insight to how the configuration of a network contri-

butes to the development of new relationships.

The literature regarding networks suggests that, in addition to an actor’sposition in a system, the nature of that actor’s 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 defines the strength of tie as a

‘‘combination of the amount of time, the emotional intensity (mutual

confiding) 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 supportfor Granovetter’s (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

influential 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 influential

within closely connected networks. Further exploration into the propertiesof network positions and influence 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 fit the resource needs of a particular actor ata 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 fit an accessible resource has in an actor’s 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 neededto 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 individual’s competence plays a major role in value

cocreation. However, a person’s self-concept, identity as well as cultural

meanings and values also influence 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 customer’sself-customization process and context.

In this view, customization occurs through a customer’s adaptation of

resources – with other private, public, and market-facing resources – rather




than in the firm’s production and delivery processes. Self-customizationdiffers 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 outfit, 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 influences 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 view-

points or behaviors across service ecosystems or markets. This is because

these social influences, what Sewell (1992) calls structure, are multi-

dimensional and dynamic. In other words, a particular actor is guided byany 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 influence the adaptation of resources across

different contexts would help to advance the understanding of how varying

institutions and contexts influence value cocreation.

Increasing Integrability

Once a resource is accessed and adapted – to fit 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, firms 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 macrolevels – is central to developing long-term relationships through exchange.

Although resources must first 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? Whatkind 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 configuration and interaction within the system itself. As mentioned,

the reconfiguration of a system, and bundling and unbundling of resources,addresses time and space constraints for actors. In a sense, firms can

increase the ability to integrate a particular resource by increasing systems

density (Normann, 2001).

When firms make efforts to unbundle and rebundle or enable customers

to rebundle its resources in ways that best fit with other resources, the

potential for value cocreation to occur increases. However, firms 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 associatedwith that experience. The picture presented in Fig. 1 reflects the mobilization

of resources based on the configuration 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 theresources 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-levelstructures (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




understanding of how various social and economic actors contribute notonly to the creation of value but also to the creation of cultures.

IMPLICATIONS

The framework for value cocreation presented in this essay fundamentally

shifts the underlying focus of value creation away from a firm’s 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 coreresource 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 beneficiary. 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 benefits each actor and allows the generation of new

knowledge and other resources. This viewpoint of continuous knowledge

transfer, application and generation, throughout an infinite web of value

cocreation, has many implications for the study and practice of marketing.This deeper understanding of value cocreation can potentially influence the

scope and responsibilities of marketing, strategic initiatives of the firm,

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 influence value cocreation. S-D logic’s ecosystems view on valuecocreation 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 firm nor the customerplays a central role in the process of value creation by itself. The focus of

value cocreation remains in a particular actor’s 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 andsocial 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 infinite number of

connections through a service ecosystem, the cocreation of value never

ceases. Like a service ecosystem, the process of value cocreation has no

definite 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 beconsidered 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 firms

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 effectua-

tion process (see Read, Dew, Sarasvathy, Song, & Wiltbank, 2009). In theprocess of value cocreation in this dynamic and unfolding world, a firm’s

marketing effort must guide internal and external communications,

conversation, and knowledge exchange. The core competency of any firm

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 firms, customers, and even competitors will

increase the competency of a firm 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 andcontexts (Lusch, Vargo, & O’Brien, 2007).

Furthermore, the conceptualization of interaction among firms and

customers drastically changes under the value cocreation framework. A




firm’s strategic approach to marketing ‘‘with’’ rather than marketing ‘‘to’’should consider the customer’s position in a market network (Lusch et al.,

2007). As portrayed in Fig. 1, the configuration of a customer’s surrounding

network moderates a customer’s ability to access, adapt, and integrate of

resources, and the network itself is a mediator of value cocreation. Firms

must pay attention to the configuration of such systems and reconfigure

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, firms should encourage customers to utilize surround-ing 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 benefits of this approach is that customers, in their efforts at

clever integration of a firm’s offerings with other resources, discover new

and novel ways to improve a firm’s offerings. In other words, increasing the

integrability of a value proposition involves increasing the likelihood that

customers will assign new meanings and uses to firm offerings and

potentially develop deeper relationships with firms. If a firm is engagedin a market through conversation and dialogue, it will learn along ‘‘with’’

the customer. To encourage such self-customization, firms should provide

access to unbundled resources, even if some of these may be from other

firms, and possibly competitors, and allow customers to rebundle them,

adding efficiency 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 value-

creation process and is relied on to continue the cocreation process, through

the use of a firm’s value proposition. Because a customer’s viewpoint onvalue is dependent upon his or her surroundings, a firm must be keenly

aware of customers’ sources of knowledge (e.g., institutions) and the social

contexts influencing value creation, which include friends, family, ethnicity,

religion, occupation, or professional identity and other reference groups or

affiliations. 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

firm or adding external attributes to an offering, firms must focus on therelationships and resources of customers. Accepting this view of value

cocreation will require firms to shift strategies and reallocate their efforts in

marketing and communications processes. It will also help inform firms




how to represent their offerings in symbols and imagery that align withcustomer perspectives. In addition, instead of focusing on unidirectional

communications, from firm to customer, firms should consider other

influences on a customer’s knowledge and the accessibility, adaptability,

and integrability of resources in a particular network of relationships and

resources. In turn, this will help firms 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 mostvaluable resources (Merz, He, & Vargo, 2009; Schau, Muniz, & Arnould,

2009).

CONCLUSION

The potential of value cocreation in a service ecosystem is infinite 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 firms as well as

customers (and other stakeholders) it serves to better realize their potential.

From this view, the creation of value is not confined to the production

processes of a firm; 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 flow of service and value cocreation.

This service-ecosystems, network-centric approach to value cocreationunderscores 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 andmorphing in surprising ways.

There is much to discover about how value cocreation occurs in systems

of service exchange. In particular, although this essay identified the




importance of accessing, adapting, and integrating resources in valuecocreation – the specific ways in which firms can increase the accessibility,

adaptability, and integrability of resources through the (re)configuration of

networks requires further examination. The identification of these compo-

nents 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 (William-

son, 2000), and structuration theory (Giddens, 1984) (see Vargo & Lusch,

2011a for details). Although the implications of value cocreation are evidentin today’s 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 under-

standing of value cocreation will only increase from the combined effort of

multiple actors, cooperating and competing to propel continuous transfer

and generation of knowledge.

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