**5. Findings**

This study investigated how actors and their interactions impact the emergence and evolution of IEs in emerging economies. To elaborate on this topic, the author integrated IE and SoS models and studied three ecosystems from the Brazilian defense industry: Cascavel, Osorio, and Guarany. The cases were compared and analyzed by applying the framework proposed in the theoretical background section. **Table 7** helps highlight the interdependencies between the main actors and the organizational environment for each ecosystem.

## **5.1 The impact of the organizational environment on IEs**

The organizational environment plays a significant role in the emergence, evolution, and death of IEs. For example, during the 1960s, most military vehicles in Brazil were at the end of their life cycle. These vehicles were made during WWII. International suppliers were no longer providing logistical support for the vehicles. The United States also restricted the sale of defense products to Latin American countries. To overcome this situation, the Brazilian government promoted the production of defense products in Brazil. In this favorable scenario for Brazilian companies, Engesa found a window of opportunity to initiate the Cascavel ecosystem.


*Dynamics of Innovation Ecosystems: Orchestrating Actors and Interactions in Emerging… DOI: http://dx.doi.org/10.5772/intechopen.111629*

### **Table 7.**

*Summary of the studied ecosystems.*

In the following decades, other factors supported the evolution of the Cascavel ecosystem. The oil crisis in 1973 left oil-producing countries in the Middle East rich overnight, increasing their demands for defense products [48]. Newly independent African countries started looking for military equipment suppliers other than their former European colonizers. The Iran-Iraq War that began in 1980 also boosted the need for defense products. Such geopolitical factors pushed Engesa to improve the performance of its vehicles to conquer the external market, thus contributing to the evolution of the entire ecosystem. Engesa also started developing the Osorio tank to enter the Saudi Arabian defense market, as the German government had refused to sell tanks to countries outside NATO. Lee et al. [49] have studied such critical factors related to changes in technology, changes in demand, and changes in institutions and public policy that may open windows of opportunity for latecomer firms to emerge as international leaders.

However, these supportive conditions changed when oil prices fell in the late 1980s, and the Middle East countries sharply decreased purchasing. Iraq stopped paying contracts in 1987 as the Iran-Iraq War had consumed its financial resources. The end of the Cold War also reduced the need for defense products worldwide.

At that time, Brazil faced several economic difficulties, such as a fall in GDP, increased unemployment, and economic recession [42]. These adverse conditions contributed to Engesa's bankruptcy in 1993 and the death of the Cascavel and Osorio ecosystems [cf. [50]].

In addition, emerging economies face other intrinsic conditions in their innovation environments. Emerging economies have a limited number of innovative companies [4], directly impacting the supply of parts and complements to IEs. Brazil, for example, despite moving up a few positions in the Global Innovation Index, going from 69th in 2016 [51] to 57th in 2021 [52], still has a long journey ahead in supporting innovative companies. As noted by Letaba et al. [53], the dynamics of IEs in developing countries are quite different from those in the developed countries.

Advanced economies generally deny critical technologies, making the catch-up process harder [50]. This situation is even worse concerning defense products, as seen in Osorio's development. The Brazilian Army also took considerable time without projects for armored vehicles after Engesa's bankruptcy. Fourteen years passed before the Army started a new project of armored vehicles. During this period, companies that might have developed sophisticated technologies could not keep their production lines running and had to leave the sector as the government did not promote new projects. This context is also typical in emerging economies, as investments in defense compete with other pressing and urgent problems, such as unemployment, education, and public health [54].

In short, during the 1970s, geopolitical and economic factors provided windows of opportunity for the emergence and evolution of the Cascavel ecosystem and, lately, for the emergence of the Osorio ecosystem. However, in the 1990s, new geopolitical circumstances and the typical scenario of developing countries were unfavorable, leading the Cascavel and Osorio ecosystems to death. Therefore, in line with Pankov et al. [55], this study emphasizes that the organizational environment can either promote or restrict the emergence and evolution of ecosystems.

### **5.2 The impact of actors and interactions on IEs**

Several actors are involved in IEs. Focal firms are generally responsible for assembling components from suppliers and integrating complementary systems from complementors. Any innovation, whether by the focal firm, supplier, or complementor, contributes to innovating and evolving the ecosystem. For this study, Engesa was the focal firm of the Cascavel and Osorio ecosystems, whereas Iveco was the focal firm of the Guarani ecosystem.

Both focal firms created platforms for their ecosystems. For example, Engesa designed a wheeled armored vehicular platform upon which several armored vehicles were assembled, such as Cascavel and Urutu. Engesa also developed the Osorio platform, a main battle tank platform. In turn, Iveco developed the Guarani platform as a basis for several armored vehicles, such as personnel carriers, reconnaissance, and engineering vehicles. By creating a standardized platform and allowing access to other ecosystem members, focal firms provide a mechanism that facilitates interaction with suppliers and complementors, thus promoting the development of innovative components and delivering value to the ecosystem [18, 21].

Engesa based the vehicular platform of Cascavel on components from the Brazilian auto industry. The company also acquired factories in Brazil to supply critical parts, such as suspension, traction, transmission, and gearboxes, thus improving control

### *Dynamics of Innovation Ecosystems: Orchestrating Actors and Interactions in Emerging… DOI: http://dx.doi.org/10.5772/intechopen.111629*

over suppliers. Regarding complementors, similar management approaches had to be used. As mentioned, the French provider of 90-mm cannons raised prices after selling the first lot of weapons. To address this situation, Engesa acquired licenses from the Belgium company Cockerill and started producing the cannons in Brazil. According to SoS literature, Engesa adopted directed authority on most suppliers and complementors of the Cascavel ecosystem. This approach helped Engesa guide the emergence and evolution of the Cascavel ecosystem.

However, for the Osorio ecosystem, Engesa had to adopt a different approach to suppliers and complementors. As the Brazilian defense industry was very limited in developing more sophisticated technologies for main battle tanks, Engesa became heavily dependent on European suppliers and complementors. Quinn et al. [56] have already investigated the relative costs and risks of strategic outsourcing, especially those related to losing control over suppliers. Accordingly, Engesa had reduced control over other ecosystem actors, as most of its relationships were based on contracts. To make Engesa's situation more challenging, international competitors warned European companies about the inconvenience of cooperating in Osorio's development. Following the SoS literature, the interactions in the Osorio ecosystem can be primarily classified as acknowledged. This approach hampered the birth of the Osorio ecosystem, as European suppliers denied the provision of critical technologies and avoided cooperating with Engesa in its new development.

In turn, Iveco adopted different types of authority in the Guarani ecosystem related to suppliers and complementors. Because suppliers were unwilling to provide a small number of parts per month to the Guarani platform, Iveco used the CNH Industrial Group name to impose conditions during negotiations. Therefore, despite being based on formal contracts, which would classify the authority as acknowledged, Iveco's authority with suppliers must be primarily understood as the directed type [17]. Regarding the complementors, interactions were looser. For example, after selecting the weapon and communications systems, the Brazilian Army hired Iveco to integrate them into the Guarani platform. Accordingly, the interaction between Iveco and complementors can be classified as acknowledged. This tighter approach with suppliers and greater flexibility with complementors has proven successful [21]. Iveco has been provided with parts and components to produce the armored vehicle while allowing complementary innovations to the platform, such as the RCWS and C2 systems. Promoting such relevant innovations help emerging economies grow globally [57].

In addition, it is worth highlighting that a C2 system can also be framed as a minor ecosystem. For example, several actors supply radio equipment, tactical computers, and software to integrate a C2 system. Initially, the relationship between these actors was closer to the collaborative type. Later, the Army realized the need to increase its authority and created the C2 Commission to organize and manage the actors and their systems. Therefore, approaching interconnected or related systems as an ecosystem may help managers deal with challenges in integrating and orchestrating the actors involved.

In summary, applying the proposed framework helped the author identify the type of authority between actors in the studied ecosystems. Based on this relationship and the role played by each actor, whether supplier or complementor, it was possible to conjecture the success or failure of the ecosystems. As illustrated, the Cascavel ecosystem presented a direct relationship between Engesa, suppliers, and complementors, facilitating the conduction of the ecosystem. On the other hand, for the Osorio ecosystem, Engesa's relationship with suppliers and complementors was of the acknowledged type with less authority and reduced control, as interactions were based only on contracts, thus hampering the guidance of the ecosystem. In turn, Iveco adopted two types of relationship: direct authority with suppliers, which ensured the development of the vehicle, and acknowledged authority with complementors, which allowed the integration of innovative complements into the vehicle. Therefore, it can be inferred that identifying the interaction between actors and managing to establish the optimal type of authority can be considered a helpful tool to orchestrate the emergence and evolution of IEs.
