Combining interrelated resources yields surplus value beyond their separate sum

Evidence

A well-known explanation for complementarities are economies of scope, which exist when the cost of producing and selling two or more goods or services together is lower than the cost of producing and selling them separately (Panzar & Willig, 1981). On a more general level, complementarities mean synergy resulting from the interaction of two or more separate but interrelated resources, rules, or practices (Pierson, 2000; Stieglitz & Heine, 2007). In the case of complementarities, the advantages of repeatedly combining interrelated activities do not simply add up; they produce an additional surplus: K(x y) K(x) K(y). Take, for instance, marketing skills and R&D capabilities, which may add up to a “core competence” (Prahalad & Hamel, 1990) of a company or a division. David (1994: 214) calls such combinations “institutional clusters.” — Jörg Sydow, Georg Schreyögg, and Jochen Koch, Organizational Path Dependence, 83

Categorization

• DEFINE: Lays out the technical vocabulary of economies of scope, complementarities, and institutional clusters with their defining conditions.
• XREF: Connects to systems thinking and complexity work on emergence, where the whole exceeds the sum of parts.