In digital ecosystems, value creation is heavily dependent on “complementors,” meaning firms which create more value by working together than separately. Stated formally, complementary firms are “superadditive” exploiters of shared positive risks. However, some relationships reduce overall value owing to negative risks. Firms are then anti-complementors or “subadditive,” meaning they create less value together than separately and may ultimately incur losses. I define such firms as “depreciators” for each other rather than complementors. Network effects amplify these outcomes. Positive network effects amplify complementary value creation as “supermodularity,” driving increasing differences and economic returns. Whereas negative network effects amplify depreciating value destruction as “submodularity,” fueling decreasing differences and diminishing returns. Importantly, both types of network effects are increasing rapidly owing to the expansion of digital networks and artificial intelligence (AI). However, even as these systems grow, their complexity, opacity and dynamism make them difficult to observe let alone manage and govern. Particularly, advanced AI diffuses rapidly within ecosystems yet is often non-explainable and opaque. Firms may assume complementarity and only later discover depreciation after exponential value destruction. My paper explains these dynamics and the implications for theories of organization and the firm, risk and strategy in digital ecosystems.
