The pricing capability lifecycle of digital innovations

Abstract

The pricing capability provides a basis for firms’ competitive advantage. However, to date, the literature has not investigated how this capability forms, develops, and matures. In this study, we define the pricing capability as a dynamic capability consisting of three operational building blocks (tools and data, human and relational resources, and processes, routines, and mechanisms) as well as two dynamic capability building blocks (alertness and responsiveness, and value-based strategic thinking). Furthermore, we propose the pricing capability lifecycle of digital innovations that incorporates insights of the dynamic capabilities view (DCV). Based on a longitudinal multi-case study of five firms, we found that the building blocks of pricing capability co-evolve together through the ad-hoc and advanced phases to the mature phase. The study contributes to the literature by integrating insights from DCV into the pricing of digital innovations.