Complementary assets are the capabilities a firm needs alongside an innovation to bring it to market, such as manufacturing, distribution, service networks or brand. An innovation that lacks them often earns more for whoever owns them.
Table of Contents
Types of complementary assets
- Generic: general-purpose assets that need no tailoring, such as standard factory equipment or ordinary distribution.
- Specialised: assets the innovation depends on, but which do not depend on it, so the dependence runs one way.
- Co-specialised: assets and innovation built for each other, so each depends on the other.
Key factors
- Timing. Before a dominant design emerges, complementary assets matter little. Once the design settles, the firm that owns them gains the advantage.
- Appropriability. If an innovation is easy to copy, owning complementary assets becomes the main way to profit from it.
- How critical the asset is. Critical assets that are cheap to build are worth owning. Critical ones that are costly may justify a partnership or a minority stake.
- Industry structure. When a whole industry becomes modular, competition squeezes profit from each part, and owning assets protects less.
Examples
Moderna. Moderna had an mRNA vaccine design in early 2020 but little capacity to make it at scale. In May 2020 it signed a ten-year deal with the Swiss contract manufacturer Lonza, which built production lines for its vaccine. Moderna gained the specialised manufacturing asset without having to build it all itself.
Dyson. James Dyson put about £500 million of his own money into an electric car, with Dyson’s own battery and motor technology. In October 2019 Dyson cancelled the project, saying the car could not be made commercially viable. It lacked the complementary assets carmakers already had, such as volume production, dealer networks and servicing.
Frequently asked questions
What is the difference between complementary assets and complements?
Complements are products customers buy alongside another product, such as apps for a phone. Complementary assets are the capabilities a firm needs to make, sell and support its own innovation.
Who introduced the idea of complementary assets?
David Teece, in his 1986 paper “Profiting from technological innovation”, to explain why innovators often lose out to firms that already own manufacturing, distribution and brands.
Should an innovator buy or partner for complementary assets?
Own those that are critical and cheap to build. Partner for those that are costly or widely available. A minority stake can protect access when full ownership is too expensive.
Do complementary assets still matter in digital businesses?
Yes, but in different forms. Cloud capacity, data, app store access and customer relationships now play the role factories and dealers once did.