Purpose This study explores how firms develop innovation ecosystems through forming alliances with suppliers and the effects on innovation, economics and consumer welfare. Design/methodology/approach This study develops two game theory models to compare supply chain structures with and without ecosystem alignment. (1) A single supplier provides components to two competing manufacturers (one innovative and one non-innovative). (2) An innovative manufacturer (focal firm) aligns with a supplier that also supplies components to a competing manufacturer. Findings An ecosystem construction strategy that alliances use to reconfigure coopetitive relationships and ecosystem alignment is identified. A manufacturer aligning with a supplier will strengthen the monopoly of the alignment, which is beneficial to both Allies but always harmful to the competitor. Interestingly, such an ecosystem construction strategy may be beneficial to future innovation, the industry and consumers. Research limitations/implications The findings raise several topics that warrant further exploration. For example, scenarios with multiple suppliers were not considered. Furthermore, the implementation of regulatory measures to mitigate the harmful effects of alignment on innovation should be investigated. Practical implications This paper provides a guide for enterprises seeking alignment and to the corresponding measures required to stimulate innovation within ecosystems. What’s more, the aligned firm should not always attempt to win the race but should instead take measures to encourage the competitor to share demand information. Originality/value Firstly, most research on supply chain management has focused on its economic impacts. There is a lack of research on the influence of ecosystem alignment on the innovation incentives of firms. Furthermore, the literature still lacks evidence of how ecosystem construction strategies can increase consumer welfare. In the present study, the authors model a complex market structure that includes a competitor, which is becoming increasingly common in high-tech markets. Thirdly, this paper is one of the few that examines the impacts of market-structure changes on innovation incentives. Most importantly, this study extends the current literature by studying coopetition in the ecosystem context.
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