Dynamics of Innovation Ecosystems: Orchestrating Actors and Interactions in Emerging Economies

Abstract

Innovation ecosystem (IE) literature explores the interdependencies between partners that jointly innovate and create value. IEs comprise various actors such as focal firms, suppliers, complementary innovators, and customers. This study elaborates on actors’ interactions that promote the emergence and evolution of IEs in emerging economies. System of Systems (SoS) literature—which classifies the types of authority between the system and its components into virtual, collaborative, acknowledged, and directed—is applied to propose a conceptual framework for analyzing IEs. Following a multiple case study, three ecosystems were selected from the Brazilian armored vehicle sector and analyzed according to the proposed framework. The results revealed that the organizational environment impacts IEs by promoting their emergence and evolution or even leading to their death. The interaction between ecosystem actors can also contribute to the success or failure of IEs. Managing to reach the optimal type of authority can be a valuable tool for orchestrating actors and their interactions in IEs.

1. Introduction

Many disruptive innovations require complementary innovations to attract customers and succeed [1]. As a result, innovative firms have become increasingly dependent on the efforts of other innovative actors within their environments [2]. Managing such dependency and complementary innovations outside firms poses significant challenges for many organizations [3], especially in emerging economies, where the number of innovative firms remains low [4].

Several models, such as supplier innovation, strategic R&D [5, 6], and the innovation ecosystem (IE), have been proposed to explain how innovative firms work with other creative partners. Among them, IE literature moves beyond the challenges within firms by encompassing the development of complementary products and services in addition to the main ones. Furthermore, it explores the interdependencies and coordination between partner organizations that jointly create value [2]. IEs comprise focal firms, suppliers, complementary innovators, customers, and other actors [7]. However, recent studies have raised several questions about how actors’ interactions impact the emergence and evolution of IEs [8, 9, 10, 11]. These questions indicate that the IE concept has not yet been consolidated [7], especially in emerging economies [12], where firms face an environment of resource scarcity, structural gaps, and institutional voids [13].

To strengthen empirical research and manage the theoretical flaws of ecosystems, scholars have recommended applying a hybrid view of biological systems and industrial engineering systems [14]. A similar approach has also been proposed to study supply chain management by merging the literature on business operation and System of Systems (SoS) engineering [15]. SoS can provide a complementary perspective based on actors’ interactions. SoS is an assemblage of individual systems with operational and managerial independence that work together as collaborative systems [16]. SoS focuses on integrating multiple complex systems supported by different managers, sponsors, funding, and goals [17].

Accordingly, by combining IE and SoS literature and exploring multiple cases of armored vehicles within the Brazilian defense industry, this study aims to elaborate on the following research question: considering the typical organizational environment of emerging economies, how do actors and their interactions impact the emergence and evolution of IEs?

This chapter is organized into six sections. The following section outlines the literature on IE, presents the types of authority in SoS, and introduces a tentative framework for analyzing ecosystems. The research method, case selection, and data collection are then described. Later, the cases are presented in detail and followed by a discussion that scrutinizes the impact of the organizational environment, the actors’ roles, and their interactions in IEs. The last section summarizes the study’s main contributions and limitations and offers suggestions for further research.

2. Theoretical background

This section provides background information on IE and SoS literature. Lastly, a tentative framework based on both literature is proposed to analyze actors’ ecosystem interactions.

2.1 Innovation ecosystem

The term “ecosystem” implies an analogy with complex biological systems. The comparison is intended to bring attention to features of business networks and unveil drivers of business success and failure [18]. Concepts in biological ecosystems such as predation, parasitism, and symbiosis may shed light on innovation and technology management [14]. When dealing with innovation challenges, some parallels with biological ecosystems can help infer which ecosystem will survive [19]. The ecosystem construct also makes the interdependencies between actors more explicit [2].

An IE is a network of interconnected and interdependent actors who cooperate and compete for value co-creation [7]. It includes the focal firm, suppliers, complementary innovators, regulatory authorities, standard-setting bodies, the judiciary, research institutions, distributors, outsourcing firms, technology providers, and other actors [18, 20]. Among ecosystem actors, complementors deserve special attention. The more innovative complementors are, the more value they deliver to the ecosystem [21].

Ecosystems are supposed to have a life cycle and follow a co-evolutionary process [7]. According to Moore [19], ecosystems develop in birth, expansion, leadership, self-renewal, and death stages. Dedehayir et al. [8] suggested the phases of preparation, formation, and operation across the genesis of IEs. However, despite the existence of coordination and governance mechanisms that guide the ecosystem life cycle, relationships between actors are always unstable, as partners can change independently of formal contracts or informal agreements [7]. Further, each actor has different attributes, decision principles, and beliefs and thus makes decisions according to them [14]. Changes in the organizational environment, such as government regulations, customer buying patterns, and macroeconomic conditions, may also threaten the ecosystem and its evolution [19].

It is also argued that IEs are built on platforms. Gawer et al. [21] defined platforms as products, services, or technologies used as a basis for other firms to create complementary innovations. Platforms can be clearly observed in the information technology industry because of their high modularity [14]. However, they can be noted in other sectors, such as automotive, aircraft, and consumer electronics [21]. Keystone organizations usually create platforms. The goal is to allow third parties to develop new products more efficiently, thus increasing productivity and improving the ecosystem’s overall health [18]. Platforms can also be understood as a standard structure composed of subsystems and interfaces from which a firm can design and develop a family of products [21].

Matching a firm’s strategy to ecosystem activities and innovations is one of the crucial aspects of the firm’s success [1]. For example, high-definition television was expected to succeed in the early 1990s. However, other critical components, such as signal compression technology and broadcasting standards, were unavailable. Michelin’s run-flat tire was introduced in 1997, but its complements of alert lights and automobile repair shops were ready only 9 years later. The online music-retailing category started in the mid-1990s but had to wait a couple of years until digital-rights-management solutions and the emergence of broadband connectivity had been settled. In short, getting to the market is of value only if ecosystem partners can get there simultaneously [1]. As these examples show, while focal firms innovated cutting-edge technology, they could not capture the value for many years since they did not synchronize their innovation strategy with complementary products and services.

2.2 System of systems

SoS research became a new focus for engineering in the 1980s when the US military aimed to integrate an independent weapon system into a large-scale system [22]. It differs from the traditional field of systems engineering. Whereas systems engineering is focused on single-complex systems, SoS engineering focuses on integrating multiple complex systems [23]. Today, various examples of SoS can be observed, such as in energy supply, water supply, air transportation, and the Internet [24].

There are many definitions of SoS. This study adopted the description provided by Krygiel [[25], p. 33]: “A system of systems is a set of different systems so connected or related as to produce results unachievable by the individual systems alone.”

Maier [16] postulated five key characteristics that help understand the field of SoS:

1. Operational independence of constituent systems: Usually, the component systems exist before the formation of the SoS and can also be required to support other SoS.

2. Managerial independence of constituent systems: Owners and managers may evolve their systems to meet other particular needs.

3. Geographical distribution: Systems can be geographically distributed.

4. Evolutionary development process: SoS development depends on the development of the constituent systems, which may happen asynchronously and incrementally.

5. Emergent behavior: It emerges from the interactions between the constituent systems.

Similar to ecosystems, SoS can also be built on platforms. Platforms are applied to integrate different systems, usually developed independently and asynchronously. For example, a military platform, such as a ship, an aircraft, or a ground vehicle, is equipped with sensors, weapons, and communications systems, which are independent systems integrated into a common platform to support user needs [24].

A practical framework applied to conceptualize and categorize SoS is based on the degree of authority between the SoS and its constituent systems. According to the Office of the Deputy Under Secretary of Defense for Acquisition and Technology [17], in the United States, the authority in SoS can be classified into four types:

1. Virtual: There is a lack of central authority to manage the SoS and no overall goal. The organizing mechanisms are relatively invisible, and interoperation is achieved through recognized protocols and not by individual agreements between the constituent systems.

2. Collaborative: The component systems interact voluntarily to meet agreed purposes and realize shared benefits. Relationships are based on agreements between the systems.

3. Acknowledged: There is a designated manager and recognized objectives for the SoS. The constituent systems have a contractual relationship with the SoS manager but retain their independent ownership and goals.

4. Directed: The SoS is centrally managed to fulfill specific purposes. Consequently, the component systems are typically subordinated to those purposes.

Dahmann [24] suggests that most SoS are a combination of different types of authority. In fact, an SoS is often comprised of constituent systems that exhibit characteristics of various kinds. For example, in some cases, an SoS owner may have subordinated systems while maintaining independence from other collaborative ones.

2.3 A conceptual framework

Scholars of the IE and SoS literature have proposed further studies beyond their specific fields. For example, Tsujimoto et al. [14] suggested simultaneously applying a hybrid view of biological and industrial engineering systems to strengthen ecosystem research. In turn, Zhang et al. [26] recommended that engineered systems realize living organism abilities, such as perception, adaptation, and self-recovery, to maintain and improve system vitality.

Following these suggestions to merge the literature, the author combined the generic schema of ecosystems from Adner et al. [2] with the types of SoS from the Office of the Deputy Under Secretary of Defense for Acquisition and Technology [17]. As a result, the study developed a conceptual framework to analyze the emergence and evolution of ecosystems. The emphasis is on actors and their interactions. Figure 1 presents the conceptual framework. The model characterizes a simplification of reality and highlights the various types of authority between actors in ecosystems. The actors and interactions outlined in the figure are just one possible example and vary for each ecosystem.

Figure 1.

A conceptual framework to analyze interactions between ecosystem actors. Source: The author, based on [2, 17].

3. Research method

3.1 Design

This study investigated contemporary events involving actors and interactions in emerging economy ecosystems. As the author was interested in understanding the dynamics within the phenomenon [27] and exploring the emergence and evolution of IEs, a “how” question was posed to guide the research. Data were accessed from diverse sources, such as project reports, requirement lists, public documents, and interviews. Based on these conditions, the author adopted the case study methodology [28] to identify the fundamental entities, their relationships, the main events, and what causes them to happen [29]. In addition, the study investigated multiple cases to provide compelling evidence and more robust conclusions [28]. Multiple cases increase external validity and help avoid observer bias [30].

3.2 Case selection

Elaborating on the tentative framework, the author adopted a theoretical sampling strategy [31, 32] and selected cases according to the following criteria:

1. Ecosystems from emerging economies—to identify the main features of ecosystems in emerging economies, as literature is absent [13].

2. Ecosystems composed of several actors—to explore different types of interaction between the ecosystem’s participants.

3. Ecosystems within the same industry—to predict similar results for literal replication [28].

For the first criterion, the author selected Brazil, a notable emerging market suggested for further investigation [33, 34]. In Brazil, large ecosystems and SoS were found in the defense industry [35], as military systems usually have hundreds of suppliers and several innovative complementors. Furthermore, cases in the defense domain are also worthy of study as they pose particular challenges not seen in other sectors [36, 37]. Accordingly, the author selected three ecosystems from the Brazilian armored vehicle sector to support the multiple case study. First, during the 1970s, Engesa built the Cascavel ecosystem to develop and produce wheeled armored vehicles for the Brazilian armed forces. Second, Engesa also initiated the Osorio ecosystem in 1982 by designing main battle tanks. Finally, Iveco Defense Vehicles became part of the Guarani ecosystem in 2007 to develop a new family of wheeled armored vehicles. The goal was to substitute Engesa’s armored vehicles, which are still in use by some Brazilian military units after more than 40 years.

3.3 Data collection

As Engesa went bankrupt in 1993, primary sources were not found available. Therefore, data supporting the Cascavel and Osorio ecosystems were collected only from secondary sources such as articles, theses, books, and magazines. For the Guarani ecosystem, in addition to secondary sources, which included official documents and project reports from the Brazilian Army, the study administered six questionnaires and conducted 12 interviews. Table 1 summarizes the interviews and questionnaires for the Guarani case.

Interviewee background and experience	Date	Type	Length
Electronics Eng., 1.5 years in the project	29 March 2016	Written	5 pages
Electronics Eng., 2 years in the project	29 March 2016	Written	5 pages
Project manager, 3 years in the project	29 March 2016	Written	5 pages
Quality Eng., 5 years in the project	29 March 2016	Written	7 pages
Manufacturing manager, 8 years in the project	29 March 2016	Written	5 pages
Product development Eng., 5 years in the project	29 March 2016	Written	5 pages
Communications Eng., 10 years in the project	7 March 2019	Face-to-face	90 min
Mechanical Eng., 5 years in the project	14 March 2019	Face-to-face	90 min
Communications Eng., an expert in the defense industry	11 April 2019	Face-to-face	90 min
Mechanical Eng., 2 years in the project	21 Jan. 2020	Face-to-face	60 min
Signal corps officer, 3 years in the project	2 Feb. 2020	Video call	60 min
Mechanical Eng., 1 year in the project	3 Feb. 2020	Video call	50 min
Bachelor of computer science, 4 years in the project	6 Feb. 2020	Video call	50 min
Signal corps officer, 6 years in the project	17 Feb. 2020	Video call	180 min
Mechanical Eng., 10 years in the project	4 May 2020	Video call	110 min
Expert in armored vehicles	12 May 2020	Video call	105 min
Mechanical Eng., 7 years in the project	19 Oct. 2020	Video call	50 min
Communications Eng., 5 years in the project	26 Nov. 2020	Video call	70 min

Table 1.

Summary of interviews and questionnaires.

Source: Compiled by the author.

3.4 Data analysis

Based on the literature review and the research question, relevant topics were selected to code the collected data. Suppliers, complementors, focal firms, emergence, evolution, innovation, managerial issues, and technical issues are examples of codes applied during the study. Based on the cross-case synthesis for data analysis of multiple cases [28], the author organized the coded data according to the proposed framework and searched for cross-case patterns to interpret the data and elaborate on the research question.

4. Results

The design of armored vehicles requires complex innovation, since it aims to integrate and balance firepower, mobility, and armored protection in the same vehicular platform [38]. By focusing on the interactions between the involved actors, this section describes the Cascavel and Osorio ecosystems developed by Engesa and the Guarani ecosystem built by Iveco.

4.1 The Cascavel ecosystem

In 1952, after the Second World War (WWII), Brazil and the United States signed a military agreement aiming at a common defense for both countries [39]. The negotiation allowed the provision of military vehicles from the United States to Brazil, such as tanks, wheeled armored vehicles, trucks, jeeps, and tractors. However, during the 1960s, the United States began to restrict sales of military equipment to Latin American countries [40]. As a result, at the end of the 1960s, the Brazilian auto industry started substituting, adapting, and refurbishing many of those vehicles. For example, working on adapting gearboxes and suspensions, Engesa developed a new suspension system called Boomerang, which was used to adapt more than a hundred military trucks used by the Brazilian Army and Marines [41].

In 1970, the Brazilian Army and Engesa also completed the prototype for Brazil’s first wheeled armored vehicle. It was a 4 × 4 vehicle named VBB-1. Ladeira Jr. [42] listed Engesa among the leading suppliers for the gearbox and traction, Mercedes-Benz for the diesel engine, and Trivellaco for the armor. Although the prototype was approved in tests, the Brazilian Army was willing to use a 6 × 6 vehicle [43]. Then, a new model was designed and developed. It was a 6 × 6 wheeled armored vehicle for reconnaissance named EE-9 Cascavel. Another vehicle was also developed by Engesa using the Cascavel platform: a 6 × 6 wheeled amphibious armored personnel carrier. It was named EE-11 Urutu. Later, using 4 × 4 traction, Engesa developed a lighter vehicle for reconnaissance, the EE-3 Jararaca [40].

In 1970, Engesa delivered the Cascavel prototypes to the Brazilian Army and Urutu to the Marines. Serial production started in 1974. However, Engesa realized the internal market was insufficient to promote the company’s business expansion [41]. Thus, Engesa’s salespeople went abroad and offered their vehicles, including two newly developed trucks, to recently independent African countries looking for new business options apart from their former colonizers. At the same time, the oil crisis in 1973 made oil-producing countries in Africa and the Middle East rich overnight, thus increasing their need for defense equipment. As a result, Engesa found a favorable environment for its military vehicles in the international market [42].

Over time, Engesa improved Cascavel to deliver a better product to the external market. The US 37-mm cannon was substituted by a French 90-mm cannon, improving the range and aim. However, after selling the first lot of 200 cannons, the French company raised prices and made the business unfeasible. To get around this situation, Engesa acquired licenses from the Belgium company Cockerill and started producing the 90-mm cannon and its ammunition in Brazil. In addition, Engesa increased the vehicle dimensions and adapted a Mercedes-Benz engine. As a result, Cascavel became a more suitable product for the external market [42].

Several countries ordered Engesa’s vehicles in the following years. Qatar is regarded as one of Engesa’s first international contracts [41]. Libya ordered 200 Cascavels initially, and even before receiving them, it ordered another lot of 200 vehicles. At the same time, Engesa sold about a hundred Cascavels to Chile. New sales were also made to other African and South American countries. Regarding the Iran-Iraq War in 1980, Iraq emerged as another relevant importer of Engesa’s armored vehicles [42]. Table 2 summarizes Engesa’s international orders from 1970 to 1990. Comparing these purchases with the Brazilian internal market, the Brazilian armed forces ordered 409 Cascavels and 223 Urutus [44].

Recipient	Quantity	Vehicle	Year of order	Year of delivery
Bolivia	(24)	EE-11 Urutu	(1977)	1979–1980
	(24)	EE-9 Cascavel	(1977)	1979–1980
Chile	83	EE-9 Cascavel	(1974)	1974–1976
	(37)	EE-11 Urutu	(1975)	1976
Colombia	(76)	EE-11 Urutu	1981	1983–1984
	120	EE-9 Cascavel	1981	1983–1984
Cyprus	(10)	EE-11 Urutu	(1982)	1984
	(36)	EE-3 Jararaca	(1982)	1984–1985
	(126)	EE-9 Cascavel	1982	1984–1988
Ecuador	(18)	EE-11 Urutu	(1983)	1984
	10	EE-3 Jararaca	1983	1984
	(28)	EE-9 Cascavel	1983	1984
Gabon	12	EE-11 Urutu	(1981)	1984
	12	EE-3 Jararaca	1981	1984
	14	EE-9 Cascavel	1981	1983
Iraq	(100)	EE-11 Urutu	1979	1980
	(200)	EE-9 Cascavel	(1979)	1979–1981
	(100)	EE-11 Urutu	1981	1982–1984
	(280)	EE-3 Jararaca	1981	1984–1985
	(200)	EE-9 Cascavel	1981	1982–1985
Libya	(500)	EE-9 Cascavel	1973	1975–1978
	(180)	EE-11 Urutu	(1981)	1981–1982
Nigeria	(75)	EE-9 Cascavel	(1992)	1994
Paraguay	12	EE-11 Urutu	(1984)	1985
	28	EE-9 Cascavel	(1984)	1985
Qatar	(20)	EE-9 Cascavel	1978	1979
Tunisia	(18)	EE-11 Urutu	1982	1983
	(24)	EE-9 Cascavel	1982	1983
Venezuela	(38)	EE-11 Urutu	1983	1984
Zimbabwe	90	EE-9 Cascavel	1983	1984–1987

Table 2.

Engesa’s international orders for wheeled armored vehicles (1970–1990).

Source: The author, according to the Stockholm International Peace Research Institute (SIPRI) Arms Transfers Database. Information in brackets indicates that the accuracy of the data is uncertain.

4.2 The Osorio ecosystem

At the beginning of the 1980s, Engesa realized that the market niche of main battle tanks might be another opportunity to diversify its armored vehicle portfolio [41]. Therefore, the company started developing the tank EE-T1 Osorio in 1982, intended to reach both internal and external markets. Due to the need for a more sophisticated embarked technology, Engesa adopted a different approach to suppliers and complementors. While the previous wheeled vehicles relied mainly on the Brazilian auto industry, the Osorio tank became widely dependent on European companies [42]. Engesa also faced retaliation from international competitors. They warned European suppliers and complementors about the inconvenience of cooperating in Engesa’s new development [42]. Table 3 presents Osorio’s leading suppliers and complementors according to Conca [45].

Country	European suppliers and complementors	Component
The UK	Dunlop	Hydropneumatic suspension
	Vickers	Turret
	RBO/Vickers	105-mm cannon
	Marconi	Shooting control system
	Airscrew Howden	Cooling system
Germany	Zahnradfabrik Friedrich	Gear
	MWM	Diesel engine
	Diehl	Track system
France	GIAT	120-mm cannon
Netherlands	Philips	Shooting control system

Table 3.

Osorio’s leading suppliers and complementors.

Source: Adapted from Conca [45].

During the 1980s, Saudi Arabia negotiated with Germany to substitute the German tank Leopard-1 with the new version, Leopard-2. However, the German government refused to sell the tanks to countries outside the North Atlantic Treaty Organization (NATO). Aiming to occupy this new market, Engesa sent a prototype of Osorio to Saudi Arabia in 1987 to compete in international bidding against tanks from the United Kingdom, France, and the United States. Although Osorio was declared feasible in the bidding, Saudi Arabia decided on the US M-1 Abrams in 1990 [40]. At that time, Engesa’s exports had also deeply declined, and some customers could not pay for their orders [46]. For example, Iraq stopped paying the contracts in 1987 as the oil price had decreased and the Iran-Iraq War (1980–1988) had depleted its financial resources [42]. These facts led Engesa to declare bankruptcy in 1993 [40].

4.3 The Guarani ecosystem

The Guarani program was initiated to modernize mechanized cavalry and transform motorized infantry into mechanized infantry. The program comprises a family of armored vehicles for the personnel carrier, mortar carrier, reconnaissance, engineering, communications, command post, radar, ambulance, demining, bridge launcher, and rescue. In 1999, the Brazilian Army issued Basic Operational Requirements for the light and medium versions of the Guarani-Reconnaissance (Guarani-R) and Guarani-Personnel Carrier (Guarani-PC) [47]. Table 4 presents a sample of the Guarani-PC Basic Operational Requirements.

Type of requirement	Requirement number	Requirement description
Absolute	04	Maximum height of 2.70 m, excluding the turret and weaponry
Absolute	11	Minimum running gear of 6 × 6
Absolute	20	Autonomy greater than 600 km on a class 2 highway
Absolute	67	Allow the installation of communication systems used by the Brazilian Army
Absolute	76	Carry one commander, one shooter, one driver, and seven marines in safety and comfort, regardless of the type of weapon or tower
Absolute	80	Allow the installation of armored turrets with 360°; of horizontal movement driven by electrical or hydraulic systems
Desirable	05	Low radar signature
Complementary	01	Multi-fuel engine

Table 4.

Sample of Guarani-PC basic operational requirements.

Source: Compiled by the author based on [47].

Based on the Brazilian Army’s methodology for the life cycle management of defense products, Army Staff convened interested parties and stakeholders in 2006 for the first decision-making meeting about the Guarani program. As a result, Army Staff started the program with the 6 × 6 amphibious armored vehicle for personnel carrier—Guarani-PC, intended to be the base platform for other types of wheeled armored vehicles. The prioritization for the personnel carrier was based on the need to substitute the Urutu vehicles developed by Engesa in the 1970s, still in use by the Brazilian Army. Army Staff also decided to obtain Guarani-PC by autonomous development through the Department of Science and Technology in partnership with a national company or consortium. In 2007, after public bidding, the Brazilian Army selected Iveco Defense Vehicles, a Brazilian subsidiary of the Fiat Group and later the CNH Industrial Group, to develop and produce 1 prototype and 16 vehicles for the pilot lot. In addition, several other companies and organizations joined the Guarani program, ranging from public institutions to military organizations and private companies. Table 5 summarizes the main involved organizations.

Organization	Type of organization	Role in the Guarani program
Army Staff	Military	Client
Army Project Office	Military	Program management
Department of Science and Technology	Military	Main contractor for the design and development phase
Logistic Command	Military	Main contractor for the serial production phase
Army Technology Center	Military	Design and development
Manufacturing Directorate	Military	Design, development, and project management
Army Evaluation Center	Military	Operational and technical evaluation
4th Mechanized Cavalry Brigade, 3rd Motorized Infantry Brigade, 9th Motorized Infantry Brigade, 15th Mechanized Infantry Brigade	Military	User
Iveco Defense Vehicles	Private	Vehicle assembler
More than a hundred suppliers: Fiat Powertrain Technologies, ZF do Brasil Ltda, Bosch Rexroth Ltda, Euroar Sistemas Automotivos Ltda, Dana Industriais Ltda, Iveco Brasil, etc.	Private	Supplier of vehicular components, for example, engine, transmission, water propeller, air conditioner, drive axles, gearbox, and suspension
Several complementors: Harris Corporation, Geocontrol, AEL Sistemas S.A., Ares Aeroespacial e Defesa, Army Technology Center, Pearson Engineering Ltd., Systems Development Center	Private and military	Provider of complementary systems, for example, communications system, tactical computer, turret, remote-controlled weapon station, construction engineering tools, and battlefield management system
Federal Legal Consulting	Public	Provider of legal advice regarding the legal feasibility of bids and contracts
Federal Court of Accounts	Public	Accounting, financial, budgetary, operational, and patrimonial inspection regarding the legality, legitimacy, and economy

Table 5.

Main organizations involved in the Guarani program.

Source: Compiled by the author.

Iveco took 6 years, from January 2008 to December 2013, to design, develop, and deliver the first prototype. Iveco based the Guarani-PC platform on technologies and components used by commercial trucks. The goal was to take advantage of commercial off-the-shelf components provided by the existing Brazilian auto industry and make development and production costs cheaper.

“The great advantage of the Guarani-PC design was not only the use of shelf components but also shelf ideas. Guarani-PC was designed with a V-frame on top of two bars, which is the chassis concept used in commercial trucks. It is the same concept, placing all parts on top of a chassis. So, it is an idea that came from commercial vehicles and made the development cost cheaper.” (Army project member)

Despite the use of commercial off-the-shelf components, many parts still had to be developed by suppliers. To ensure the quality of parts, Iveco runs a Supplier Quality Engineering process. The process includes several activities, such as meeting suppliers to review materials, documents, drawings, recordings, packing, storage, and product identification. As a result, Guarani-PC has already reached 91% nationalization regarding the number of parts produced by the Brazilian industry. However, suppliers were not always interested in producing just a few parts per month for Guarani-PC as they were used to supplying hundreds of components per month for commercial trucks and thousands of components per month for passenger vehicles. In this context, the negotiation with the Guarani-PC suppliers for fair prices was based on the purchasing power of the CNH Industrial Group, to which Iveco belongs.

“Developing suppliers in Brazil with low production volumes is a challenge. As a result, the purchasing group relies on the unified strength of the CNH Industrial Group to impose certain conditions on suppliers.” (Iveco supplier quality analyst)

In addition to the prototype and the pilot lot, the Brazilian Army acquired some Guarani-PCs for doctrine experimentation by infantry and cavalry troops. Furthermore, these lots allowed user feedback to the project management team, thus improving vehicle development. After approving the vehicle in 2016, the Brazilian Army officially adopted Guarani-PC and hired Iveco to produce 1580 vehicles. The 400th Guarani-PC was delivered in July 2019. Table 6 summarizes the contracts through which Iveco has been hired to produce Guarani-PCs, including the internal market of Brazil and the external markets of Lebanon and the Philippines.

Recipient	Quantity	Vehicle	Year of order	Selling price
Brazil	17	Guarani-PC (1 prototype and 16 vehicles for the pilot lot)	2007	US$ 18,213,420.34
Brazil	86	Guarani-PC (infantry doctrine experimentation lot)	2012	US$ 118,638,010.04
Brazil	26	Guarani-PC (infantry doctrine experimentation lot)	2013	US$ 31,211,317.46
Brazil	75	Guarani-PC (cavalry doctrine experimentation lot)	2014	US$ 86,548,082.80
Brazil	1580	Guarani-PC (serial production)	2016	US$ 1,774,309,852.72
Lebanon	(20)	Guarani-PC	2014	Not available
The Philippines	28	Guarani-PC	(2020)	Not available

Table 6.

Summary of Guarani-PC contracts.

Source: Compiled by the author according to the Brazilian Federal Government Transparency Portal and the SIPRI Arms Transfers Database. Information in brackets indicates that the accuracy of the data is uncertain. The selling price was converted into US dollars based on the contract completion date.

Based on the requirements, Guarani-PC was designed to allow the installation of complementary systems such as communication equipment (requirement number 67) and armored turrets (requirement number 80). The integration of these complementary systems has provided additional capabilities and contributed to the Guarani-PC’s evolution. For example, command and control (C2) systems and a remote-controlled weapon station (RCWS) have already been developed and integrated into Guarani-PC.

C2 systems aim to provide situational awareness for vehicles and troops on the field. The system comprises one radio for voice communication, one radio for data exchange, one tactical computer, and a battlefield management system (BMS) software. The system allows the troops to exchange relevant information in real time, such as maneuver coordination, vehicle positions, and messages, thus supporting the command and control of military operations. In 2013, the Systems Development Center developed the first BMS prototype. Army Staff issued the C2 Basic Operational Requirements for Guarani-PC in 2015. Lately, due to subject complexity and the need to organize the C2 suppliers involved, Army Staff created the C2 Management Committee in 2017 to advise on decisions about C2 systems.

The need for an RCWS system was observed in 2004 during the United Nations Stabilization Mission in Haiti (UNSTAMIH). Brazilian troops were deployed in Haiti for military operations in urban terrain and used 16 Urutu vehicles to support police operations. In this scenario, the driver and the machine gunner were vulnerable to short-range shots, and the turrets had to be adapted to protect the crew. Consequently, in partnership with Ares Aeroespacial e Defesa, the Army Technology Center initiated a project in 2006 to design and develop an RCWS prototype named Remax. It was the first RCWS to be developed in the Southern Hemisphere. After being tested and approved in other vehicular platforms, Remax was finally integrated into the prototype of Guarani-PC in 2013 and was officially adopted by the Brazilian Army in 2016.

Summarizing the section, Figure 2 shows the three studied ecosystems in a timeline view of their main events within the stages of emergence, evolution, and death.

Figure 2.

The studied ecosystems’ timeline. Source: The author.

5. Findings

This study investigated how actors and their interactions impact the emergence and evolution of IEs in emerging economies. To elaborate on this topic, the author integrated IE and SoS models and studied three ecosystems from the Brazilian defense industry: Cascavel, Osorio, and Guarany. The cases were compared and analyzed by applying the framework proposed in the theoretical background section. Table 7 helps highlight the interdependencies between the main actors and the organizational environment for each ecosystem.

Ecosystem	Organizational environment	Suppliers	Complementors
Cascavel (Engesa)	Need for replacement of WWII vehicles in Brazil The oil crisis in 1973 Need for defense equipment in Africa and the Middle East Iran-Iraq War (1980–1988)	Mostly from the existing Brazilian auto industry	A French supplier raised the price of the 90-mm cannon and made the business unfeasible Engesa acquired licenses to produce the 90-mm cannon and ammunition in Brazil
Osorio (Engesa)	The German government refused to sell Leopard-2 to countries outside NATO	Widely dependent on European companies Engesa’s international competitors warned European suppliers and complementors about the inconvenience of cooperating with Osorio’s development	Widely dependent on European companies Engesa’s international competitors warned European suppliers and complementors about the inconvenience of cooperating with Osorio’s development
Guarani (Iveco)	Need for replacement of Cascavel and Urutu vehicles in Brazil, produced by Engesa in the 1970s and 1980s Need for an RCWS system in Haiti during UNSTAMIH	The platform is based on technologies and components used by commercial trucks 91% of Guarani-PC parts are produced by Brazilian industry Iveco imposed certain conditions on suppliers to guarantee delivery of Guarani-PC parts	The C2 system comprises other systems such as radio equipment, tactical computer, and BMS software The Brazilian Army created the C2 Management Committee to organize suppliers CTEx and Ares designed and developed the RCWS system in Brazil

Table 7.

Summary of the studied ecosystems.

Source: The author.

5.1 The impact of the organizational environment on IEs

The organizational environment plays a significant role in the emergence, evolution, and death of IEs. For example, during the 1960s, most military vehicles in Brazil were at the end of their life cycle. These vehicles were made during WWII. International suppliers were no longer providing logistical support for the vehicles. The United States also restricted the sale of defense products to Latin American countries. To overcome this situation, the Brazilian government promoted the production of defense products in Brazil. In this favorable scenario for Brazilian companies, Engesa found a window of opportunity to initiate the Cascavel ecosystem.

In the following decades, other factors supported the evolution of the Cascavel ecosystem. The oil crisis in 1973 left oil-producing countries in the Middle East rich overnight, increasing their demands for defense products [48]. Newly independent African countries started looking for military equipment suppliers other than their former European colonizers. The Iran-Iraq War that began in 1980 also boosted the need for defense products. Such geopolitical factors pushed Engesa to improve the performance of its vehicles to conquer the external market, thus contributing to the evolution of the entire ecosystem. Engesa also started developing the Osorio tank to enter the Saudi Arabian defense market, as the German government had refused to sell tanks to countries outside NATO. Lee et al. [49] have studied such critical factors related to changes in technology, changes in demand, and changes in institutions and public policy that may open windows of opportunity for latecomer firms to emerge as international leaders.

However, these supportive conditions changed when oil prices fell in the late 1980s, and the Middle East countries sharply decreased purchasing. Iraq stopped paying contracts in 1987 as the Iran-Iraq War had consumed its financial resources. The end of the Cold War also reduced the need for defense products worldwide. At that time, Brazil faced several economic difficulties, such as a fall in GDP, increased unemployment, and economic recession [42]. These adverse conditions contributed to Engesa’s bankruptcy in 1993 and the death of the Cascavel and Osorio ecosystems [cf. [50]].

In addition, emerging economies face other intrinsic conditions in their innovation environments. Emerging economies have a limited number of innovative companies [4], directly impacting the supply of parts and complements to IEs. Brazil, for example, despite moving up a few positions in the Global Innovation Index, going from 69th in 2016 [51] to 57th in 2021 [52], still has a long journey ahead in supporting innovative companies. As noted by Letaba et al. [53], the dynamics of IEs in developing countries are quite different from those in the developed countries.

Advanced economies generally deny critical technologies, making the catch-up process harder [50]. This situation is even worse concerning defense products, as seen in Osorio’s development. The Brazilian Army also took considerable time without projects for armored vehicles after Engesa’s bankruptcy. Fourteen years passed before the Army started a new project of armored vehicles. During this period, companies that might have developed sophisticated technologies could not keep their production lines running and had to leave the sector as the government did not promote new projects. This context is also typical in emerging economies, as investments in defense compete with other pressing and urgent problems, such as unemployment, education, and public health [54].

In short, during the 1970s, geopolitical and economic factors provided windows of opportunity for the emergence and evolution of the Cascavel ecosystem and, lately, for the emergence of the Osorio ecosystem. However, in the 1990s, new geopolitical circumstances and the typical scenario of developing countries were unfavorable, leading the Cascavel and Osorio ecosystems to death. Therefore, in line with Pankov et al. [55], this study emphasizes that the organizational environment can either promote or restrict the emergence and evolution of ecosystems.

5.2 The impact of actors and interactions on IEs

Several actors are involved in IEs. Focal firms are generally responsible for assembling components from suppliers and integrating complementary systems from complementors. Any innovation, whether by the focal firm, supplier, or complementor, contributes to innovating and evolving the ecosystem. For this study, Engesa was the focal firm of the Cascavel and Osorio ecosystems, whereas Iveco was the focal firm of the Guarani ecosystem.

Both focal firms created platforms for their ecosystems. For example, Engesa designed a wheeled armored vehicular platform upon which several armored vehicles were assembled, such as Cascavel and Urutu. Engesa also developed the Osorio platform, a main battle tank platform. In turn, Iveco developed the Guarani platform as a basis for several armored vehicles, such as personnel carriers, reconnaissance, and engineering vehicles. By creating a standardized platform and allowing access to other ecosystem members, focal firms provide a mechanism that facilitates interaction with suppliers and complementors, thus promoting the development of innovative components and delivering value to the ecosystem [18, 21].

Engesa based the vehicular platform of Cascavel on components from the Brazilian auto industry. The company also acquired factories in Brazil to supply critical parts, such as suspension, traction, transmission, and gearboxes, thus improving control over suppliers. Regarding complementors, similar management approaches had to be used. As mentioned, the French provider of 90-mm cannons raised prices after selling the first lot of weapons. To address this situation, Engesa acquired licenses from the Belgium company Cockerill and started producing the cannons in Brazil. According to SoS literature, Engesa adopted directed authority on most suppliers and complementors of the Cascavel ecosystem. This approach helped Engesa guide the emergence and evolution of the Cascavel ecosystem.

However, for the Osorio ecosystem, Engesa had to adopt a different approach to suppliers and complementors. As the Brazilian defense industry was very limited in developing more sophisticated technologies for main battle tanks, Engesa became heavily dependent on European suppliers and complementors. Quinn et al. [56] have already investigated the relative costs and risks of strategic outsourcing, especially those related to losing control over suppliers. Accordingly, Engesa had reduced control over other ecosystem actors, as most of its relationships were based on contracts. To make Engesa’s situation more challenging, international competitors warned European companies about the inconvenience of cooperating in Osorio’s development. Following the SoS literature, the interactions in the Osorio ecosystem can be primarily classified as acknowledged. This approach hampered the birth of the Osorio ecosystem, as European suppliers denied the provision of critical technologies and avoided cooperating with Engesa in its new development.

In turn, Iveco adopted different types of authority in the Guarani ecosystem related to suppliers and complementors. Because suppliers were unwilling to provide a small number of parts per month to the Guarani platform, Iveco used the CNH Industrial Group name to impose conditions during negotiations. Therefore, despite being based on formal contracts, which would classify the authority as acknowledged, Iveco’s authority with suppliers must be primarily understood as the directed type [17]. Regarding the complementors, interactions were looser. For example, after selecting the weapon and communications systems, the Brazilian Army hired Iveco to integrate them into the Guarani platform. Accordingly, the interaction between Iveco and complementors can be classified as acknowledged. This tighter approach with suppliers and greater flexibility with complementors has proven successful [21]. Iveco has been provided with parts and components to produce the armored vehicle while allowing complementary innovations to the platform, such as the RCWS and C2 systems. Promoting such relevant innovations help emerging economies grow globally [57].

In addition, it is worth highlighting that a C2 system can also be framed as a minor ecosystem. For example, several actors supply radio equipment, tactical computers, and software to integrate a C2 system. Initially, the relationship between these actors was closer to the collaborative type. Later, the Army realized the need to increase its authority and created the C2 Commission to organize and manage the actors and their systems. Therefore, approaching interconnected or related systems as an ecosystem may help managers deal with challenges in integrating and orchestrating the actors involved.

In summary, applying the proposed framework helped the author identify the type of authority between actors in the studied ecosystems. Based on this relationship and the role played by each actor, whether supplier or complementor, it was possible to conjecture the success or failure of the ecosystems. As illustrated, the Cascavel ecosystem presented a direct relationship between Engesa, suppliers, and complementors, facilitating the conduction of the ecosystem. On the other hand, for the Osorio ecosystem, Engesa’s relationship with suppliers and complementors was of the acknowledged type with less authority and reduced control, as interactions were based only on contracts, thus hampering the guidance of the ecosystem. In turn, Iveco adopted two types of relationship: direct authority with suppliers, which ensured the development of the vehicle, and acknowledged authority with complementors, which allowed the integration of innovative complements into the vehicle. Therefore, it can be inferred that identifying the interaction between actors and managing to establish the optimal type of authority can be considered a helpful tool to orchestrate the emergence and evolution of IEs.

6. Conclusions

This study explored the emergence and evolution of IEs in emerging economies. Following the suggestions of recent studies [14, 15], SoS literature was combined with ecosystem literature to strengthen the research. More specifically, the study adopted the types of authority proposed in the SoS literature (virtual, collaborative, acknowledged, and directed) to analyze actor interactions in IEs. Three ecosystems from the Brazilian armored vehicle sector were studied to elaborate on the topic.

The study found that the organizational environment can antagonistically impact innovation ecosystems. For example, geopolitical and economic factors can either open windows of opportunity and promote the emergence and evolution of ecosystems or even lead to their deaths. In addition, the research identified that the type of authority between ecosystem members might also contribute to the success or failure of these ecosystems. Therefore, this study suggests that knowing the current type of authority between ecosystems’ actors and managing to reach the optimal one can be a valuable tool to orchestrate the ecosystem evolution.

Finally, as this research is limited to the Brazilian defense industry, further studies on other sectors and countries may help clarify its tentative contribution to the IE literature.

Acknowledgments

The author would like to thank Gen. Tales Eduardo Areco Villela for supporting the Guarani Ecosystem interviews and Gen. Juraci Ferreira Galdino for his insightful thoughts on the Brazilian defense industry. This work was supported by the National Council for Scientific and Technological Development (CNPq), Brazil (reference number: 203048/2015-6), and Sweden’s Innovation Agency (Vinnova), Sweden (research grant numbers: 2018-02930 and 2021-03523).