MSc Strategic Innovation Management New Sustainable Business Model Development by Integral Value Sharing and Collaboration:

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MSc Strategic Innovation Management

New Sustainable Business Model Development by Integral

Value Sharing and Collaboration:

What can be learned from Smart City Development?

By

Wouter Feije van der Galiën

s2091321

Supervisor: dr. Bartjan Pennink

Co-Assessor: dr. Eelko Huizingh

Date: 20-06-2018

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Abstract

This thesis analyses different components of multi-actor multi-value creation and its influence on the generation of new sustainable business models, contributing to the scarce scientific literature on the topic. Firstly, literature is reviewed comparing the creation of values with concepts from the literature fields of Stakeholder Theory, Public-Private Partnerships, Open Innovation and Collective Action. Secondly, Smart City development is analysed due to the presence of clear multi-actor multi-value dynamics within this context. This has been done by gathering empirical data through semi-structured interviews with involved respondents. It becomes apparent that valuable lessons can be learned from Smart City development towards the generation of new sustainable business models. The creation of multiple values can be maximised by the proposed concept of Integral Value Sharing and collective generation of new sustainable business models. Knowledge has to be shared and co-innovation has to be fostered by implementing various open innovation platforms. The collective generation of new sustainable business models, when taking a system-level or network-level perspective, results itself in a proposed new collaborative sustainable business model.

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1. Introduction

Due to the rising global population, accelerating global development and associated increasing resource use and environmental impacts, it seems to become clear that business as usual is not the road towards a sustainable future (Bocken et al., 2014). Sustainable development at a societal level is impossible without the development of sustainable organizations. Literature shows that taking a business model perspective may be one way to facilitate the creation of sustainable solutions (Boons and Lüdeke-Freund, 2013; Giloman and Gauthier, 2016) and stimulating new business philosophies (Schaltegger et al., 2016) but within this approach it will be important that organizations rethink their perception of value and their value creating logic. Next to economic value also social and ecological value become more important (Jonker, 2012; Porter and Kramer, 2011) Furthermore, value is not anymore created by organizations acting alone, but by multiple organizations in the development of new business models (Beattie and Smith, 2013). The added value of acting together has such a massive potential that searching for solutions in isolation by one organization is no longer an option.

Literature has recognized the importance of multi-actor (Public Private Partnerships, Giloman and Gauthier, 2016; Reypens et al., 2016; Open Innovation, Chesbrough, 2006) and multi-value (Creating Shared Value, Porter and Kramer, 2011; Triple Bottom Line, Elkington, 1998) creation, but there is still a lack of understanding about how all these individual concepts take shape when they come together and their impact on the development of new sustainable business models (NSBMs). Although, according to Jonker (2012), collective collaboration and deliberately creating multiple values are crucial in the creation of NSBMs. New sustainable solutions often rely on collectively managed projects, which means that organizations need to adapt their business models to deliver value collectively, a phenomenon that research on NSBMs should address (Giloman and Gauthier, 2016). Furthermore, there is a call for understanding which kind cooperative arrangements are employed in the generation of NSBMs within and across sectors (Schaltegger et al., 2016).

This research aims to analyse the different components of multi-actor multi-value creation and its influence on the development of NSBMs and therefore the following research question and sub-questions have been identified: How does multi-actor multi-value creation shape the generation of new sustainable business models?

- Which values are important in the generation of new sustainable business models? - Which actors are involved in the value creation?

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A qualitative research method will be applied and the research question will be answered with two main strategies. Firstly, literature will be reviewed in which a comparison is made between the creation of values and concepts from the literature fields of Open Innovation, Collective Action, Stakeholder Management and Public Private Partnerships. Secondly, the development of Smart Cities will be investigated and used as an instrumental case to analyse various aspects of multi-actor multi-value creation and to uncover what lessons can be learned concerning the generation of NSBMs.

Since it is expected that by 2050 70% of the population will live in urban areas (UN, 2008), cities play an essential part in social and economic aspects and have a massive impact on the environment (Mori and Christodoulou, 2012). Therefore, it is of crucial importance to generate insights into the generation of new sustainable projects and solutions in this context. The aspects of multi-actor multi-value creation seems to play an important role in Smart City development. Smart Cities are considered technology leaders in the area of integrating environmental and social problems and are the key to an economically and sustainable successful economy (Ratten, 2017). Furthermore, developing smarter cities is complex and requires multi-actor cooperation between government, market players and knowledge institutions. A city is not smart when it does not include all its stakeholders in the urban innovation process and is based on knowledge sharing and collaboration across all levels of society (Selada, 2017). Since Smart City development is still an ongoing process, different areas and aspects remain obscure. One of these issues that need to be tackled is that Smart Cities require new business models (Bélissent, 2010), however limited research has been published describing such practical business models (Díaz-Díaz et al., 2017).

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illustrative model containing the different aspects of multi-actor multi-value creation. Secondly, the methodology will be presented and clarified. Thirdly, findings will be presented from the case study and compared with the theory in the discussion. Lastly, the research question will be answered in the conclusion and limitations and further research suggestions will be presented.

2. Literature Review

In order to develop a better understanding of the core subjects under investigation, previous research on the topics of Smart Cities, business models, business model innovation, sustainable business models and value creation will be presented below. During the review of the literature, various concepts that arise from the literature will be compared and illustrated with the development of Smart Cities. From this comparison questions will be raised into the direction of the theory and what can be researched empirically.

2.1 Smart City

The label Smart City has been circulating all over the globe, having its impact on urban strategies in both small and large towns. Smart City initiatives are aiming to face the increasing problems in companies, public government, non-profit organizations and urban areas. These initiatives will increasingly appear due to both the opportunity and the need. Cities require to become smarter to mitigate environmental degradation and enhance sustainability (Snow et al., 2016). Increasing the usage of technology, a smarter city protects the environment and creates better life conditions (Dameri and Rosenthal-Sabroux, 2014). Furthermore, a Smart City aims to create competitive and innovative commerce, an increased quality of life and a sustainable greener city (Bakıcı et al., 2013). Since the fact that research on Smart Cities is limited and it is a relatively new research field, many definitions exist and there is not a consensus on a general definition (O’Grady and O’Hare, 2012).

Various researchers claim that a Smart City features a city that is able of sustaining social, environmental and economic progress (Allwinkle and Cruickshank, 2011; Caragliu et al., 2011). Others state that a Smart City incorporates the usage of networked infrastructures as a way to enable economic, environmental and social development (Bakıcı et al., 2013; Hollands, 2008). However, all the definitions in the literature have in common that there is an attempt to design and describe a comprehensive and integrative representation of city development for today and the future (Gil-Garcia et al., 2015).

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viewed as a continuum in which public and private actors together with other actors work on different initiatives that aim to increase the liveability of the city and simultaneously generate economic, social and environmental value, thus become smarter. The increasing number of publications on the Smart City concept indicate that there is an increasing need in understanding the complex and diverse challenges citizens, governments and companies face in the development of these new urban environments (Walravens and Ballon, 2013). To deal with these challenges arising in Smart City development and simultaneously assuring long-term sustainability, it is necessary to develop viable business models (Schaffers et al., 2011). 2.2 Business Models

Although the notion of the business model as a theory of business is not new, the research on business models has relatively recently received increasing attention of many scholars (Joyce and Paquin, 2016). The necessity of describing and analysing new forms of business, especially in the field of e-business, e-commerce and information technology, at the end of the 20th_{century resulted in the emergence of early business model concepts}

(Dubosson-Torbay et al., 2002; Osterwalder, 2004) The business model started gaining notice as a management concept trough publications such as those of Magretta (2002) and Chesbrough and Rosenbloom (2002) who connected the business model to innovation and strategy. According to Teece (2010) a business model is a description of how an organization operates and the organization’s architecture of the value creation, delivery and capture mechanisms employed. The traditional business model articulates how an organization will transform its capabilities and resources into economic value. A common definition given by Teece (2010) of the business model, emphasising the value creation function (Schaltegger et al., 2016) is as follows: “The business model represents the design or architecture of the value creation, delivery and capture mechanisms. The essence of a business model is that it crystallizes customer needs and ability to pay, defines the manner by which the business enterprise responds to and delivers value to customers, entices customers to pay for value, and converts those payments to profit through the proper design and operation of the various elements of the value chain” (p. 179).

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2012). The clarification of the business model can lead to discovering new opportunities for value creation and therefore support business model innovation (Joyce and Paquin, 2016). 2.3 Business Model Innovation

The business model does not solely facilitate organizational or technical innovations, however can itself become subjected to strategic innovation (Schaltegger et al., 2012). External or internal changes might lead to the urgency for business models to evolve or to be innovated (Wirtz et al., 2016). Business model innovation describes the conversion from one business model to another. Next to the transformation within incumbent organizations, it also describes the creation of entirely new business models (Geissdoerfer et al., 2016) and aims to discover new ways to create value for the involved stakeholders (Spieth et al., 2014). Since the business model is seen as a potential entity of innovation, many studies have focussed on the innovation dimension of the business model (Foss and Saebi, 2017). Especially in the development of sustainable business models, organizations need to implement radical changes. Business model innovation can support the focus towards more sustainable and social centred activities and unfold the full potential of sustainable development (Schaltegger et al., 2012). It is essential to make organizations change their traditional models towards NSBMs by producing new ways of creating, capturing and delivering value (Joyce and Paquin, 2016).

The immense growth of urban areas is accompanied with aspects that challenge the liveability of cities. Issues such as transportation and energy consumption raise growing concerns about the pollution of air and water in cities. These issues result in potential loss of the liveability of cities due to problems with waste management, traffic congestions and scarcity of recourses (Gil-Garcia et al., 2015). Smart City projects need to tackle these issues by implementing changes in multiple dimensions of these urban systems, where one dimension is innovating the involved business models (Almirall et al., 2014). Furthermore, recent technological developments enable various novel ways of value creation and thus new business models (Díaz-Díaz et al., 2017). Although it is clear Smart Cities have the need for new business models (Bélissent, 2010), questions arise about the shape that these business models should assume.

2.4 Sustainable Business Models

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2009; Schaltegger et al., 2012; Stubbs and Cocklin, 2008) and recognize it is the key to procuring greater environmental and social sustainability (Lüdeke-Freund, 2010). A sustainable business model can be defined as: “A business model that creates competitive advantage through superior customer value and contributes to a sustainable development of the organization and society” (Lüdeke-Freund, 2010, p. 23). The development of sustainable business models presents an opportunity to change the current focus on economic value solely and offers a chance to reconceptualise the purposes of organizations and the value creation logics they follow (Porter and Kramer, 2011; Stubbs and Cocklin, 2008). Pursuing environmental and social purposes does not mean that profit needs to be sacrificed. Instead of a trade-off between these purposes, they can mutually reinforce each other (Osterwalder and Pigneur, 2010).

Sustainable business models are in particular required in the development of Smart Cities. Sustainable development is one of the core concepts in the development of a Smart City (Gil-Garcia et al., 2015). It is essential to global sustainable development that cities become Smart, since the urban population is increasing substantially. Therefore, the United Nations has created Goal 11 of the Sustainable Development Goals (SDG), which aims to make urban settlements inclusive, safe, resilient and sustainable (UN, 2015). Modern cities are facing enormous challenges such as the achievement of a climate-neutral architecture and ecological sustainability and various new socio-economic opportunities arise (Díaz-Díaz et al., 2017). NSBMs are of critical importance in tackling these challenges and in reaching SDG 11 and important questions arise how multiple values will be generated in Smart City development.

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system-level of the sustainable business model and in particular the collaboration between the different stakeholders.

Figure 1. Sustainable Business Model Concept, System-Level. Based on Stubbs and Cocklin (2008).

Sustainable business models build on the business model construct by combining relevant concepts of stakeholder management and sustainable value creation and at the same time employ a long-term perspective (Geissdoerfer et al., 2016). Long-term commitment requires a vast amount of trust, which is another important requisite of a new sustainable business model, between the different parties involved (Jonker, 2012).

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2.5 Value Creation

According to Lepak et al. (2007) “value creation depends on the relative amount of value that is subjectively realized by a target user (or buyer) who is the focus of value creation— whether individual, organization, or society—and that this subjective value realization must at least translate into the user’s willingness to exchange a monetary amount for the value received” (p. 182). Traditionally there has been a strong emphasis on economic value creation, where consumers are “outside the firm” and value is created “inside the firm” (Prahalad and Ramaswamy, 2004). However, more recently there has been significant literature about the collaborative creation of economic value between businesses (Chesbrough, 2006), business and its customers (Bowman and Ambrosini, 2000; Lepak et al., 2007), and the government and business and/or non-profits (Bryson et al., 2006; Cooper et al., 2006). Nowadays the essence of value creation seems to be embedded in, next to the architecture of the organization, the network of partners, requires collaboration and is a collective task (Jonker, 2012).

Although multi-actor value creation has been widely addressed, there has been a strong focus on merely economic value and organizations seem to be entangled in this narrow view of value creation. Guaranteeing short term profits keeps being the driver in this outdated approach. The depletion of natural recourses, the economic distress of communities and the wellbeing of customers and other critical long-term success determents are often ignored (Porter and Kramer, 2011). Sustainability focusses on tackling the determents mentioned above and addresses these long term socio-economic and environmental issues. Elkington (1998) described that sustainability can be achieved by following a Triple Bottom Line (TBL) approach focussing on new types of social, economic and environmental partnerships. Although scholars criticized that TBL simplified the complexity of sustainability, a vast amount of organizations have adopted the TBL approach through Corporate Social Responsibility (CSR). Although there is not a clear consensus on the definition of CSR, it can be defined as: “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission 2001, p. 6).

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environmental values (Jonker, 2012). The generation of multiple values create key conditions for a successful transition to a sustainable society.

To integrate both multiple actors and multiple values together in one matrix, Pennink (2016) developed the multi-actor multi-value matrix. Not only does this matrix aim to analyse which actors and values are involved in the value creation process, it tries to create insights into which values are important to which actors. Furthermore, in the top left corner of the matrix there is a strong focus on the return on investment of the organization itself, thus economic value. The right bottom corner will contain varieties of social values. The matrix aims to further clarify how these values take shape for all actors and which values are specifically important for them.

Figure 2. Multi-Actor Multi-Value Matrix (Pennink, 2016).

The collective creation of multiple values is at the core of the development of a Smart City. At the base of the idea of a Smart City is the connection and creation of social capital and human capital, in order to create sustainable economic development and an increased life quality (Beretta, 2018). Smart solutions need to be found that are creating social well-being and economic prosperity on the one hand, as well as being both sustainable and highly efficient on the other (Beretta, 2018). It is of crucial importance to understand how NSBMs will take shape since they play an important role in the realization of solutions for these complex challenges.

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2.5.1 Value Creation and Stakeholder Management

Traditionally stakeholder theory has had a strong organization-centered focus and the organization was viewed as a closed system, independent of the environment in which they operated and external and internal stakeholders had to be controlled to reach the goals of the organization (Svendsen and Laberge, 2005). Freeman (1984) defined stakeholders as “any group of individuals that can affect or is affected by the achievement of an organization's objective” (p. 46). The most common stakeholders include shareholders, suppliers, the community, governmental actors, employees, non-governmental organizations and interest groups (Joyce and Paquin, 2016).

However, more recently, due to the increasing focus on sustainability, other stakeholders have been recognized such as the environment and society (Morioka et al., 2016). Furthermore, the highly complex sustainability, environmental and socioeconomic challenges arising in the 21st_{century, demands organizations to embrace novel ways of engaging, being}

and thinking with stakeholders (Svendsen and Laberge, 2005). There seems to be a realization that there has to be a shift in the mindset of organizations and that complex and cross-boundary issues can only be tackled if there is a shift towards a systems view (Svendsen and Laberge, 2005). This view indicates that the social and natural systems which organizations depend on are crucial for achieving long-term sustainability (Post et al., 2002). In order to tackle complex societal and environmental problems, organizations need to move beyond the boundaries of single firms and participate in collaborative networks (Reypens et al., 2016). These networks consist of multiple stakeholders with different backgrounds, collectively co-creating innovative value and aiming to achieve “stakeholder synergy” (Tantalo and Priem, 2014). No single organization has the knowledge and expertise to develop solutions to the complex challenges that arise across the globe (Lusch et al., 2010) and therefore multiple stakeholders are interacting creating multiple types of value (Nissen et al., 2014).

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These forms of collaboration between multiple stakeholders can be defined as multi-stakeholder networks, which consists of actors from business, civil society, governmental and/or supranational institutions collectively searching a common approach to a certain issue that has impact on all of them and is overly complex to tackle without cooperation (Roloff, 2008). The stakeholder network aims to tackle a shared cross-boundary problem, issue or opportunity (Svendsen and Laberge, 2005). According to Roloff (2008) “In the context of multi-stakeholder networks a stakeholder is any group or individual who can affect or is affected by the approach to the issue addressed by the network” (p. 12). Stakeholders tend to be hostile and sceptical about the idea of cooperation, however the complex problem urges the involved actors to interact in a non-hierarchical mode with each other (Roloff, 2008). Multi-stakeholder networks have the knowledge and recourses to create whole-system novel solutions and innovations that no one stakeholder could accomplish on their own (Svendsen and Laberge, 2005). Shared sustainable value must be developed and organizations have to collaborate and cooperate by addressing issues such as community development, partnering for research and development and connecting with suppliers and thus engage with different stakeholders towards integrative solutions and consider multi-objectives (Morioka et al., 2016).

In the development of Smart Cities stakeholder networks gain increasing importance. A Smart City ecosystem requires all the involved stakeholders to perform a more active role (Zygiaris, 2013). Private sector participation is required in achieving sustainability (Koppenjan and Enserink, 2009) and the creation of a Smart City requires its designers, managers and citizens to solve many technical and social problems. The knowledge that is required to tackle these problems is growing, complex and widely diffused and thus collaboration is essential (Snow et al., 2016). Furthermore, the social problems that arise in urban areas are highly intertwined and complex and in order to generate solutions to these problems collaboration is required between non-profit organizations, businesses, multiple city agencies and society at large (Gil-Garcia et al., 2015). Smart City initiatives have more chance of succeeding in urban areas that have promoted more strong relationships between all involved stakeholders (Sandulli et al., 2017). Important questions arise with regard to which actors are involved in the stakeholder networks that exist in the development of Smart Cities and what influence this has on the generation of NSBMs.

2.5.2 Value Creation and Public Private Partnerships

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and private sectors need to combine their efforts to tackle the complex societal problems that are arising in the areas such as the economy, mobility and livability (Brinkerhoff and Brinkerhoff, 2011). The search of value by both public actors as well as private actors is the main driver for almost every public-private engagement (Kivleniece and Quelin, 2012). The idea behind PPPs is the creation of mutual added value, where the different actors involved gain additional benefits that will outweigh the cooperation costs (Klijn and Teisman, 2003). These values can take a variety of forms, however what is important is the added value that this “synergy” creates.

Since public and private organizations have different recourses and capabilities, shared value (Porter and Kramer, 2011) is created by sharing and gaining knowledge, skills and information (Dentoni et al., 2016). Shared value is only generated when the different partners have access to capabilities and recourses that they would otherwise not have (Rondinelli and London, 2003) The combined efforts can lead to for example the deployment of recourses in a more sustainable way (e.g. waste management or controlling of pollution) (Kivleniece and Quelin, 2012). However, in the value creation process public and private actors need to invest actively in linking their problem definitions and interests and work towards solutions for all involved. The need arises to go beyond contractual relationships. Partnerships are required which include a collective dedication to achieve a joint outcome (Brinkerhoff and Brinkerhoff, 2011). Brinkerhoff and Brinkerhoff (2011) argue that public and private partners need to mutually commit to a shared goal where they share both control and responsibility.

The cooperation between public and private actors raises important questions about the organizational models in which these connections are structured (Henisz, 2006), since these organizational forms reside within an intermediate state between private and public bureaucracies (Kivleniece and Quelin, 2012). Klijn and Tiesman (2003) found that although often in a PPP actors succeed in acting collectively at the start, however often there is no collective outcome. Mostly the relationships between the different actors are organized in a contract relationship instead of a partner relationship.

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to govern the PPP. Integrative arrangements require a greater extend of collaboration, where both private and public actors collectively share responsibilities for the management, development and delivery of a certain public good. Integrative PPPs create value by building on complementary recourses and governance advantages of public and private organizations and enable synergistic combination of public and private recourses (Kivleniece and Quelin, 2012).

In order for private actors to exploit the opportunities that arise in Smart Cities, cooperation is required with local public actors (Sandulli et al., 2017). Furthermore, Smart City projects often involve PPPs where private and public actors tackle a certain issue that arises in the urban environment (Kwak et al., 2009). PPPs are critical in the development of a Smart City and therefore it is important to understand the public-private dynamic in this context. Rather than viewing local public actors as bureaucratic barriers to scaling up ventures (Ma et al., 2018), the development of Smart Cities is expected to require co-creation and collaboration between public actors and private actors across different industries.

2.5.3 Value Creation and Open Innovation

Innovation is connected very closely to value creation. According to Lee et al. (2012) innovation can be defined as any new approach or idea that is used in a fundamentally different way to create value for the organization and other stakeholders such as suppliers, communities, partner organizations, customers, governments or even the general good of humanity. Since the boundaries between an organization and its environment are slowly fading away, innovations are able to transfer outward and inward between different organizations more easily, leading to impacts at different levels such as the firm, the consumer, the industry and society (Bogers et al., 2017).

Recently scholars have recognized that value should not only be created for different stakeholders, but that stakeholders should be included in the innovation process. Organizations should not only rely on internal ideas, but should focus on both internal as well as external knowledge. Furthermore, there should be more collaboration with a wider variety of actors

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creation together with the external actors (Westergren and Holmström, 2012). The eventual aim of open innovation is the construction of a world-class value chain along with a new innovation ecosystem in which several complements can be integrated into coherent value creating solutions based on collaborative arrangements (Lee et al., 2012).

Open innovation encompasses two parts, namely inside-out and outside-in. According to Chesbrough (2006) the outside-in part implicates the opening up of the organization’s innovation processes to multiple external contributions and inputs. This external knowledge can be found by collaborating with a wide array of external stakeholders or seeking usable knowledge from specialists (West and Bogers, 2014). The inside-out part on the other hand demands organizations to let unused or underused knowledge to flow outside of the organization so that other actors can use this in their business models (Chesbrough, 2006). At the heart of this part are spill overs that are seen as an opportunity rather than a costs. The organization can expand their business model or generate different business models outside the organization.

Chesbrough et al. (2006) argue that open innovation will not be for a selected few. Instead the practices will expand to customers, partners, third parties, suppliers and even the general community. The concept of open innovation is being applied to arrange and manage a vast amount of different actors that are being employed in different roles in the innovation process. Designing and organizing these innovation communities will take a leading role in the future of open innovation (Chesbrough, 2006). Research indicates that the locus of innovation is progressing from the firm level towards the network level (Schilling and Phelps, 2007). In additionLee et al. (2012) argue that there is a need for a new innovation model that goes beyond the model of open innovation. In today’s new ecosystem where all the actors are interdepended and networked, a platform needs to be created where external, internal, co-creative and collaborative ideas can be melted together to generate organizational and shared value. They label this approach as co-innovation. The co-innovation platform is able to create value based on network effects that will provide new value or experience for all stakeholders involved (Lee et al., 2012). These collaborative arrangements are especially effective for the creation of value through new business models.

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for the innovation economy (Cohen et al., 2016). Innovation eco-systems such as urban labs, where challenges and problems associated with a city are reviewed and where highly different stakeholders innovate together (Scozzi et al., 2017), is one of the examples of open innovation in Smart City development. Questions arise, when looking at these eco-systems, concerning the actors that need to be involved, which collaborative innovation arrangements exist and how this can impact the development of NSBMs.

2.5.4 Value Creation and Collective Action

Collective action can be defined as an action taken by a group to achieve a shared goal (Marshall, 1998). The groups or organizations that participate in collective action aim to generate certain value that could not be achieved by acting alone. The definition mentioned above implies the desire to reach a commonly shared goal, in this case the creation of value and in particular multiple values. However, collective action does not necessarily result in the creation of additional value. Olsen (1965) argues that “unless there is coercion or some other special device to make individuals act in their common interest, rational, self-interested individuals will not act to achieve their common or group interests” (p. 2). This is where collective action problems arise, such as the free rider problem. Although collective action is of crucial importance, actors involved can have the tendency to let others cope with the cost of the provision of collective benefits (Poteete and Ostrom, 2004). Furthermore, there can be conflicting goals or trust issues between the different parties involved (Lee et al., 2018). The political and economic achievements of societies are critically dependent on the way in which the members of different communities overcome the collective action problem (Ostrom and Ahn, 2009). Furthermore, collective action problems that are unable to be overcome will result in the waste of natural recourses. Maintaining these recourses depends upon successful co-operation and co-ordination (Poteete and Ostrom, 2004).

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collective action is the development of institutions that generate rewards to overcome collective action problems (Poteete and Ostrom, 2004).

Especially in the creation of multiple values and the road to sustainability, due to the high level of complexity, collective action institutions become particularly appropriate. Above all bottom-up collective action institutions, in combination with experimental governance are useful measures to deal with these complex problems (Six et al., 2015). One involved actor might perceive a certain problem, before other actors are confronted with it and has to have the ability to warn the others involved. Furthermore, if someone discovers a certain solution to a problem, the other actors in the network should be given the possibility to know about it. The problems and solutions discovered should be dealt with, experimented with and actors have to learn from one and other (Six et al., 2015). Furthermore, a result from one actor can be compared through different forms of peer review by the other actors, leading to the successful identification and generalization of valuable inputs and less attractive ideas to be rejected early on (Keohane and Victor, 2015).

The development of Smart cities will require both private and public actors to create value with the entire civic community (Iaione, 2016), collectively generating new ideas to tackle the complex problems that arise in modern cities. There has to be a shift towards the co-management and co-production of different organizational architectures in order to create multiple values. In the generation of NSBMs in Smart Cities, bottom-up experimental governance might the way to facilitate collective action. However, it is important to understand how all actors contribute to the development of the Smart City and how collective action problems can be overcome.

2.6 Illustrative Model: Multi-Actor Multi-Value Creation

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sustainability. The aspects mentioned above regarding multi-actor multi-value creation are presented in the figure below and will be used to structure the primary data collection:

Figure 4. Multi-Actor Multi-Value Creation.

3. Research Expectations: Smart City development

Although the theory recognizes various aspects of multi-actor multi-value creation and their importance in a Smart City, it is unclear how exactly all these aspects take shape in Smart City development. Based on the literature the following expectations have been formulated:

Firstly, it is expected that collaboration will play an important role in the development of Smart Cities. In order to tackle the complex challenges of sustainability and the social pressures that arise in urban areas, thus creating multiple values, various actors need to work together through open innovation and co-innovation platforms. Furthermore, it is expected that public and private actors will collaborate together through integrative partnerships.

Secondly, the expectation is that the involved actors will have long-term collaborative arrangements and trust plays an essential part in this. Next to this, the involved actors will have a shared vision and a shared system-level goal.

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4. Methodology

4.1 Research Method

The concept of both NSBMs as well as multi-actor value creation are both fairly ill-defined, especially when both topics are brought together in one research setting. Therefore this study applies a qualitative research approach. Firstly, due to the fact that value creation should be approached from a cross-theoretical perspective (Morris et al., 2005), different components of value creation have been identified and have been compared with concepts from the theories of Stakeholder Management, Open Innovation, Public-Private Partnerships and Collective Action. The different components have been examined to search for insights, patterns or commonalities. Secondly, a case study has been conducted where the transition of the cities Groningen and Amsterdam towards becoming Smart Cities has been analysed. According to Yin (2015) the case study method is especially suitable when the research question starts with: “How?” or “Why?”. It offers an in depth investigation of a contemporary phenomenon within its real life context and is particularly appropriate when the boundaries between context and the phenomenon are not explicitly clear. Furthermore, a case study is interesting when the phenomenon under investigation is complex (several actors, goals etc.).

Specifically, this study makes use of an instrumental case study. This mode of conducting a case study provides further understanding of a particular issue or assists in refining a theory (Stake, 1995). The case plays a supportive role, facilitating the understanding of another topic or theoretical question. The activities of a city towards increasing its “smartness” offers valuable insights into the involved actors, values and modes of collaboration, innovation and collective action towards new sustainable solutions such as NSBMs. Smart City development offers an interesting arena to provide understanding about and provide lessons for the generation of NSBMs, due to the fact that multiple actors and values are included and sustainability plays a key role (Ratten, 2017; Selada, 2017). Combining both general theories with knowledge gathered in the field, this thesis aims to translate the findings of Smart City development into lessons that can be learned in the theory of NSBMs and generate multiple insights and contribute to the current literature on the topic.

4.2 Case Selection

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acknowledged as an extreme case. Furthermore, Amsterdam has an high visibility of cooperation between private and public actors and has a Smart City platform that presents local projects and experiments (Sengers, 2016). This Amsterdam Smart City platform uses a collective approach and aims at bringing different partners together to test new initiatives. The platform is used to share all the acquired knowledge and experience between the different actors. The development of Amsterdam as a Smart City, due to its relatively mature Smart City development, presents an valuable opportunity to see how multi-actor multi-value creation takes shape in the generation of new sustainable solutions.

Groningen on the other hand has expressed its ambitions of becoming a Smart City (Sengers, 2016), however is not one of the frontrunners in the Netherlands. Where Amsterdam has a very broad focus and aims to tackle various Smart City areas, Groningen seems to put its focus on becoming an Smart Energy City. Furthermore, where Amsterdam has already implemented a Smart City strategy and program, Groningen is still searching how a Smart City approach can be applied and used and is at an earlier stage of Smart City development. Therefore, it is interesting to see how Groningen transitions towards a Smart City and which insights this will generate towards NSBM development.

Table 1. Smart City Characteristics (Sengers, 2016). 4.3 Data Collection

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development and have been contacted with e-mail, telephone or via the personal network LinkedIn. The search for respondents has resulted in 5 actors from Groningen and 6 actors from Amsterdam willing to participate in an interview. All conducted interviews have been transcribed which has resulted in a document of 62 pages containing 25211 words. The interviews where either conducted in English (2) or Dutch (9). The interviewees have been approached by telephone, skype or face-to-face and have been listed below:

Table 2. Overview of Interviewees.

4.4 Data Analyses

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continuous review of the transcribed interviews. The transcription of the interviews can be found in Appendix IV and V (p. 61 - 121) Furthermore, the computer program Atlas.ti has been used to structure the findings and to support the identification of recurrent patterns and categories. The analyses is based on the Gioia Methodology, which aims to seek qualitative rigor in inductive research (Gioia et al., 2013). Firstly, 1st_{order analyses was conducted (similar}

to open coding (Straus and Corbin, 1994)) resulting in 182 open codes. Secondly, differences and similarities have been sought between the 1st_{order codes and this process has resulted in}

the generation of 30 2nd_{order themes (similar to axial coding (Straus and Corbin, 1994)). These}

2nd_{order themes have been refined even further in 9}₂nd_{order aggregate dimensions. These}

aggregate dimensions together with some 2nd_{order themes have been the base for structuring}

the data and reporting the findings. All codes can be found in the data structure that is presented in the Appendix II (p. 54 - 60). This data structure permits a structural visual aid and presents a graphic portrait of how the progression was made from the raw data from the interviews to themes and categories in the data analyses (Gioia et al., 2013).

5. Multi-Actor Multi-Value Dynamics in Smart City Development

This chapter presents the main findings from the conducted primary data collection. The purpose was to develop a thorough understanding, through conducting interviews with various involved parties, of multi-actor multi-value creation in Smart City development and how this influences the generation of different Smart City initiatives. Firstly, the findings will be presented covering the involved actors and values which are important in Smart City development and how these values can be realized. These findings will be used to further develop the multi-actor multi-value matrix of Pennink (2016), which will be discussed more deeply in chapter 7. Secondly, the modes of collaboration will be highlighted that have been recognized in Smart City development. Thirdly, various aspects necessary in achieving this collaboration will be presented. Furthermore, findings from the case of Groningen and Amsterdam will be compared to search for differences and similarities. Lastly, an interaction effect has been found between several Smart City areas. This will be presented next to the collaborative national and international efforts.

5.1 Multiple Involved Actors

It becomes apparent that in the development of Smart Cities multiple actors require to be involved in order to achieve the desired outcomes. The 1st_{order analyses of the interviews}

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and grouped into five 2nd_{order themes, which eventually led to the aggregate dimension of}

“Multiple Involved Actors”. The 2nd_{order themes are Public, Private, Knowledge Institution,}

NGO and People. These themes are the base for this sub-chapter and further clarification of the codes and themes can be found in the data structure in Appendix II (p. 54). All interviewees mentioned that public and private actors need to be involved. Furthermore, actors such as knowledge institutions (KI), NGO and people are mentioned various times, but not by all interviewees. As one interviewee stated that mentioned all:

Although not all interviewees reported these three hindmost actors they are mentioned several times. The exact number of reported actors are presented in the table below:

Table 3. Mentioned Involved Actors.

Dynamics private actors. Although participation of the private sector seems to be acknowledged widely, several interviewees state that within this sector distinct actors have different roles. Due to the found importance of the private actors and the distinction of various roles within this sector, analyses was conducted more deepening the understanding of this group of actors. The coding process has resulted in sixteen 1st_{order codes directly derived from the}

interviews, which then where categorized in three 2nd_{order themes. These themes are Start-ups,}

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Dynamics public actors. Just as private actors, public actors where mentioned by all interviewees to be involved in Smart City development and likewise various roles where distinguished. Data analysis resulted in the recognition of two 2nd_{order themes, deriving from}

ten 1st_{order codes. These themes are Public Tasks and Facilitating & Stimulating Role. Further}

details can be found in Appendix II (p. 59). Public actors play a role in Smart City development by ensuring and protecting the interest of civilians and are a connecting point for bringing actors together. Furthermore, the interviewees report that public actors require to have a facilitating and stimulating role in the development of Smart Cities. Financing opportunities and subsidies should be provided where necessary. They should for example assist start-ups in the initial stage of their development, provide subsidies for sustainable initiatives proposed by the private sector and the people and facilitate knowledge sharing opportunities where different actors are being connected. Lastly, when a sustainable solution or project is successful, legislation should be created but public actors should not oversteer.

Role of People. In the development of a Smart City the civic society gains a more active role. Five 1st_{order codes derived from the interviews where connected in the 2}nd_{order theme:}

Role of People (Appendix II p. 60). The people are impacted by Smart City development and not including them in this transformation might lead to missed knowledge and suggestions. Furthermore, citizens can have valuable ideas that can increase the success and impact of Smart City developments. The following citation ,given by an interviewee, illustrates this:

Role of Knowledge Institutions. Five 1st_{order codes derived from the interviews}

where connected in the 2nd_{order theme: Role of Knowledge Institutions (Appendix II p. 60).}

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development and how Smart City projects can make genuine impact. Next to these tasks they have the responsibility to provide education in the area of Smart City development and connect students to this topic.

NGO. Although several interviewees recognize the role of NGO’s in Smart City development, little information is given about their exact contribution. Only one 1st_{order code}

(Appendix II p. 54) was found giving a slight indication of the part that NGOs play. Two interviewees state that NGOs might represent specific purposes as health or the environment and to ensure this are included in specific Smart City developments.

5.2 Multiple Involved Values

Various values are recognized by the interviewees in Smart City development. 16 different 1st_{order codes where derived from the data describing these values and where grouped}

into three different 2nd_{order themes, which have been presented below and can be found in}

Appendix II (p. 54).

Economic value. Profits is a driver for many involved actors and the discussion about which actors are going to be responsible for financing the projects seems to be a reoccurring theme. The big private actors that can deliver various products and services in Smart City development, such as shared bicycles, are selected based on the lowest price. Furthermore, economic growth is one of the criteria that has to be met when projects aim to participate in Smart City development.

Social value. The interviewees recognize topics such as increasing the liveability of the city, fostering social inclusion, tackling social problems, increasing the quality of life and developing usable services for citizens as drivers in Smart City development.

Ecological value. One interviewee stated that fighting future threats like decreasing CO2 emission, is one of the founding principles of a Smart City. Next to reducing mankind’s CO2 footprint, factors such as increasing biodiversity, reducing the emission of particulate matter and increasing the amount of green in city have been found.

5.3 Integral Value Sharing

The creation of social, environmental and economic value are all present in Smart City development. The 1st_{order analyses resulted in 5 first order codes leading to the 2}nd_{order theme}

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was the result of combining 5 1st_{order codes indicating the necessity of the involvement of}

multiple actors. The success of Smart City development depends on an active role of all parties and for this big collaborative efforts are required. However, different involved actors seem to have divergent priorities regarding the required values. 7 1st_{order codes, indicating the different}

focus areas, where grouped in the 2nd_{order theme Value Prioritization. For example private}

actors focus more on the creation of economic value (e.g. profit), where public actors are found to give priority to creation of social values (e.g. increasing life conditions of citizens). Developing a Smart City, and thus generating multiple values, seems to be achieved when various actors are involved due to their divergent prioritization of the various values. The three 2nd_{order themes have resulted in the aggregate dimension of Integral Value Sharing. When the}

whole range actors are involved in Smart City development, there is a higher likelihood of creating multiple values. For example for creating better life conditions for citizens, which is found to be the main aim of Public actors, innovation by private actors driven mainly by economic value is necessary.

When applying and taking the perspective of the multi-actor multi-value matrix of Pennink (2016) when looking at Smart City development, it would take the shape as presented in Figure 5. The connection between the matrix and Integral Value Sharing is further elaborated in the discussion.

Figure 5. Multi-Actor Multi-Value Matrix for Smart City development. 5.4 Collaboration

Since the fact that multiple actors are included in the development of a Smart City and the generation of multiple values seem to be dependent on this, working together is found to be essential. The 1st_{order analyses yielded 73}_{open codes all concerning either modes of}

collaboration or characteristics of collaboration. These 1st_{order codes where categorized in 8}

2nd_{order themes that structure this sub-chapter and together resulted in the aggregate dimension}

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5.4.1. Complementing Public Private Collaboration

Public-private collaboration is found to be an important in Smart City development. Next to the fact that private and public actors are reported by all interviewees as involved actors, the collaboration between them is a reoccurring topic in the interviews. In achieving Smart City development both the private and public actors need to complement each other and work together to ensure the liveability of the city. Interviewees state that the data collected by public actors has to be shared with private actors. Since the local government collects data from various sources in a city, they have insights into certain issues and opportunities that arise in urban areas. For Smart City development this data has to be shared with private actors that in turn are enabled to develop creative applications for this data that the citizens can use.

The financial dependency is another aspect that is recognized in Smart City development. Different projects and initiatives are dependent on both subsidies from public actors as well as investments from private actors. Furthermore, the government plays a role in the financing of start-ups that have valuable ideas for Smart City development, by facilitating start-up programmes. As mentioned before the public sector seems to have a facilitating and stimulating role and should enable private actors to experiment and test their novel Smart City solutions. Public actors have to create circumstances in the city where private actors can implement their innovative solutions and as mentioned before provide start-ups with stimulants to come up with new Smart City ideas and accommodate scale-up opportunities where needed.

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5.4.2 Collaborative Innovation

Smart City development is characterized by an open flow of knowledge, data and recourses. Collaborative innovation is highly interconnected with knowledge sharing and this sub-chapter is therefore partly based on the 1st_{order codes leading to the 2}nd_{order theme}

Knowledge Sharing (Appendix II p. 57). All involved actors have specific knowledge and data that, only when combined, lead to certain Smart City solutions. An example is provided by one interviewee stating that:

Innovation Platform. An innovation platform or entity is discovered to be a common phenomenon in Smart City development. Various platforms exist where Smart City development has the priority. The interviewees indicate that the challenges arising in Smart City development can be tackled with increased speed when various actors come together in different innovation platforms, where challenges are tackled collectively. Furthermore, these platforms act as a place where the city comes together and provides the possibility to experiment and test Smart City ideas with all involved actors. As one interviewee states:

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Table 4. Innovation Platforms in Smart City development

Furthermore, the data yielded various characteristics of the collaboration within Smart City development resulting in 4 2nd_{order themes consisting of 37 1}st_{order codes (Appendix II}

p. 57) The 2nd_{order themes are described in the following 4 paragraphs.}

5.4.3 Knowledge Sharing

Sharing information, expertise and experience is the most mentioned subject by the interviewees. Some respondents indicate it is the key for Smart City development. Knowledge sharing is happening in various ways. Firstly, there are gatherings where actors from different areas come together to tackle or have discussion about a certain problem arising in the city. Here sustainable solutions are presented and information is shared about different topics such as mobility, energy and data. Secondly, open workshops are organized where different actors come together and discuss Smart City development. Thirdly, platforms such as mentioned above are in place where all actors can present their solutions and share knowledge. For example the DataLab:

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thinking and tend to keep their knowledge in-house, however they do see an opportunity in knowledge sharing. As one interviewee mentions:

5.4.4 Shared Vision & Goal

The findings show that a shared vision does not always exist in Smart City development. However, the interviewees do recognize this is necessary. When a shared vision does exist there seems to be a common underlying vision and shared value between the actors in Smart City development, but within this common goal or vision the different actors have their own concerns. The most common value and vision that the interviewees acknowledge is increasing the liveability of the city. However, where public actors put emphasis on the quality of life of the citizens and fostering social inclusion, an NGO can be involved that within that spectrum focusses on generating environmental value. Private actors can put the priority on making profits, however they keep the underlying value of making the city more liveable in mind. The following quote exemplifies the existence of a shared value and goal, but also recognizes the sub-goals that these different actors are found to have within this context:

5.4.5 Timeframe of Collaboration

The duration of the collaborative efforts within Smart City development seems to differ depending on the focus area. Some interviewees argue that the collaboration should be short term and have a short cycle. Certain projects are experimental and brief collaborations are required to test certain solutions. These then, when successful, can be continued in longer collaborations. However, when not producing the required outcomes, collaborative efforts should be abandoned.

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In some areas the collaboration is longer and takes a greater amount of time before completed. For example in the area of mobility enormous efforts are required for developing a Smart City:

5.4.6 Trust

Several interviewees state that trust is important in the collaboration in Smart City development, however it is not given that all the actors trust each other. One found requisite for trust is the ability of the actors to share openly and freely. Naturally, when collaborations are longer there tends to be higher trust. But in the novel dynamics that come with Smart City development, collaboration has to happen between partners that are not used to working together. Here is found to lie a big challenge. The aim should be to have trust in the centre of your network and everything should be built around that.

5.5 Interconnectedness Different Areas

The findings indicate that in Smart City development issues are not tackled in isolation. The 1st_{order analyses resulted in 11 initial codes that are the base for 2 2}nd_{order themes}

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5.6 Collaborate Across City Boundaries

Collaboration and knowledge sharing does not seem to remain within the boundaries of the city. 2 2nd_{order themes where distinguished from the raw data named National}

Collaboration and Sharing Internationally. Various interviewees indicate that best practices are shared or need to be shared with other cities within the Netherlands and with cities from other countries. When one idea or initiative proves to be effective, it can be used in other cities as well. Therefore, start-up programs are opening up their doors for foreign participants and innovation platforms from different cities are searching to connect with each other. Furthermore, within this spectrum, it is mentioned it would be a useful strategy for each city to focus on a specific topic in Smart City development (e.g. energy, mobility, circular economy) and subsequently share the solutions for problems within these domains with other cities. This would decrease competition between cities and avoid that equal solutions are being developed in different cities at the same time.

5.7 Cross-Case Analysis: Differences

This sub-chapter is based on a comparative table that can be found in Appendix III (p. 60) and was mainly derived from the interviews with the two public actors from Groningen and Amsterdam. Although many similarities have been found between Smart City development in Groningen and Amsterdam, there are still some differences. It is important to present these differences in the findings since valuable lessons can be learned by Groningen from Amsterdam. Amsterdam seems to be more advanced in their Smart City approach, where Groningen is still at the very beginning of Smart City development.

Amsterdam. Firstly, in Amsterdam there is a strong focus on taking a bottom-up approach. Public actors do not dominate the development of the city and try to facilitate other actors to participate. If any actor has an idea or a solution, Amsterdam provides various opportunities to present these and at the same time makes sure the right actors are in place and knowledge is shared. Therefore, there is more collaboration between the different actors and the creation of multiple values becomes more likely. Furthermore, there are far more innovation platforms in Amsterdam, where all actors can deliver input for Smart City development, then in Groningen.

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aims to share knowledge and best practices with other countries. It also stimulates international participation in its Smart City development.

Groningen. In Groningen, due to the early phase of Smart City development, different actors are still searching in which ways they need to collaborate and what forms this collaboration needs to take. Although collaborative efforts are found where different actors work together tackling a certain problem, such as a emission free inner-city, platforms for collaboration remain scarce and civic engagement is not apparent. To really generate multiple values, further collaboration should be stimulated and facilitated. Furthermore, Groningen seems to put a strong focus on the area of energy and mobility. However, to become an actual Smart City a more broad focus should be taken. The aspects found in Amsterdam should be implemented in Groningen as well, increasing the generation of multiple values.

6. Discussion

The analysis of Smart City development yielded various results that present valuable lessons for the development of NSBMs. Firstly, the included actors and values have been specified and described that exist in Smart City development. Secondly, the necessity of generating multiple values with multiple actors in Smart City development was recognized and prioritisation of the multiple values by the included actors was discovered. This resulted in the recognition of the concept of Integral Value Creation. Furthermore, various forms and characteristics of the collaboration towards Smart City development were found. Next to this there seems to be an interconnectedness between Smart City areas and collaboration goes across city boundaries. Lastly, Groningen seems to be at the beginning of its Smart City development and can learn from Amsterdam that seems to be a more mature Smart City.

In this section a comparison will be made between the different aspects that have been derived from the theory to be important in multi-actor multi-value creation and the findings from the primary data collection. This will be used to further develop the idea of the multi-actor multi-value matrix of Pennink (2016) and to produce lessons that can be learned from Smart City development in the direction of the generation of NSBMs. The comparison and discussion will be the base for the development of a new sustainable business model proposed later on in this chapter.

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the development of Smart Cities and thus in urban areas this research recognises that a “quintuple helix” network is required including public actors, private actors, knowledge institutions, people and NGO’s. Due to the importance of the creation of multiple values in sustainable business models (Bocken et al., 2013; Stubbs and Cocklin, 2008) this research proposes that the generation of NSBMs in urban areas will require the same actors as found to be necessary in Smart City development.

The development of NSBMs requires to go beyond the organization-centric view and has to be approached taking a systems view (Svendsen and Laberge, 2005), just as Smart City development. Traditional sustainable business model thinking still places an emphasis on the organization-centric view (Geissdoerfer et al., 2016; Schaltegger et al., 2012) where the organization itself has to individually generate sustainable value for external stakeholders and develop and employ a sustainable business model. Furthermore, the generation of multiple values has likewise had a very organization-centric focus where each organization has to generate economic, social and environmental value separately (Elkington, 1998; Jonker, 2012; Porter and Kramer, 2011).

However, given that the included actors in Smart City development prioritize economic, ecological and social values differently and have very different roles and characteristics, multi-actor incorporation will enhance multi-value creation and increase the generation of sustainable solutions and sustainable business models. This phenomenon is termed Integral Value Sharing, building on the concepts of CSV of Porter and Kramer (2011) and multiple value creation of Jonker (2012), where a broad variety of actors collectively tackle a certain issue maximising the creation of economic, social and environmental value. This then in turn will lead to an increase in innovative sustainable solutions, such as sustainable business models. Therefore, it is proposed that a stakeholder network (Roloff, 2008) or collaborative network (Reypens et al., 2016), including public actors, private actors, knowledge institutions, NGOs and people, is required that collectively generates NSBMs increasing the probability of successfully tackling the enormous challenges we are facing today.

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differentiating characteristics and capabilities. The analyses of Smart City development clearly shows the variating role that each actor needs to take and it becomes clear that all actors are necessary in a city becoming truly “Smart”. Where the public actors have a very stimulating and facilitating role, the private actors have the responsibility in executing and innovating. Knowledge institutions bring in new knowledge, experiment and open the debate about the topic. The people come up with new ideas that would otherwise never been thought of and NGOs ensure a focus on the environment or other specific topics.

When only including the leftmost three actors, various ideas, knowledge and innovations would be overlooked decreasing the focus towards the realization of social and environmental values. Meanwhile when only incorporating the rightmost three actors, economic value might not be created although it is required in multi-value creation. Without financial support a brilliant innovative sustainable solution or business model might never surface. Combining all these actors as a whole, and therefore enabling Integral Value Sharing, will increase the amount and variety of sustainable solutions found and will result in innovations that could never have been generated when acting in isolation (Svendsen and Laberge, 2005). The introduced concept of Integral Value Sharing moreover builds on the theory of Collective Action (Olsen, 1965), where multiple values and innovations are created collectively that could never be generated when each actor would operate alone. Figure 6.1 illustrates this where only covering one focus area is insufficient. When all actors are included both focus areas will be covered, leading to Integral Value Sharing which in turn increasing the possibility of finding sustainable solutions, maximising multi-value creation (Figure 6.2).

Figure 6.1 Multi-Actor Multi-Value Matrix (Pennink, 2016): Focus Areas

MSc Strategic Innovation Management New Sustainable Business Model Development by Integral Value Sharing and Collaboration: