Competing in the Era of Emergent Architecture: The Case of Packaged Software Industry

The firms that comprise the prepackaged software industry form a complex system engaged in systems-based competition. This complex system survives and grows because it follows emergent design principles notably articulated by Herbert Simon. In particular, complex systems form stable subsystems -clusters - that can be described (in this industry) as a stack. In this research, we study the evolution of the software industry using data on packaged software development firms over 13 years (1990-2002) across functional markets. We show that by exploiting complementarities based on the emergent architecture, firms can outperform competitors that use complementarities that are based on the espoused architecture/stack, which outperform those that ignore architecture altogether