Co-creators vs e-retailers: an analysis of power in the digital value chain

Abstract

Supply chains as descriptors of business models provide processes of value creation and value delivery, which are often performed by a number of different companies. This article develops a framework of unbalanced power in capturing value between those who create value and those who deliver it, giving a better academic comprehension of how empowerment distorts B2B relations throughout the value chain. The context of analysis is the book industry, in which authors and publishers are considered as co-creators of value and E-retailers deliver value. We propose that servitization and digitalization of the industry has brought the industry towards a demand chain approach empowering E-retailers. We empirically validate this proposition through a unique survey containing information of 8,000 consumers residing in UK and US. The estimation of demand functions using the payment card method determines that while in new releases market price equals profit-maximization point for publishers, in book categories in which there are not well defined property right like classic novels, E-retailers impose discounts of 30%-40% in respect to the publisher’s profit maximization price. Results have implications for practitioners and policy makers.