This article presents a theory of ecosystems, focusing on the conditions and mechanisms that enable their emergence and dynamics. The authors argue that modularity is key to ecosystem formation, as it allows distinct yet interdependent organizations to coordinate without full hierarchical control. Ecosystems are distinguished by nongeneric complementarities, which determine their value creation and capture. The article explores different types of complementarities—unique, supermodular, generic, and specific—and how they shape ecosystem structures and interactions. It also discusses the role of hub firms in managing ecosystems and the importance of alignment among participants. The authors propose that ecosystems are distinct from traditional markets and supply chains, as they enable coordination through shared rules and standards. The article also highlights the importance of governance and regulation in ecosystem development, and how ecosystems can influence each other through competitive dynamics. The authors conclude that ecosystems are complex systems that require a deeper understanding of their underlying mechanisms to fully grasp their value creation and capture dynamics. The research contributes to the strategy literature by offering a framework for understanding ecosystems and their role in competitive advantage.This article presents a theory of ecosystems, focusing on the conditions and mechanisms that enable their emergence and dynamics. The authors argue that modularity is key to ecosystem formation, as it allows distinct yet interdependent organizations to coordinate without full hierarchical control. Ecosystems are distinguished by nongeneric complementarities, which determine their value creation and capture. The article explores different types of complementarities—unique, supermodular, generic, and specific—and how they shape ecosystem structures and interactions. It also discusses the role of hub firms in managing ecosystems and the importance of alignment among participants. The authors propose that ecosystems are distinct from traditional markets and supply chains, as they enable coordination through shared rules and standards. The article also highlights the importance of governance and regulation in ecosystem development, and how ecosystems can influence each other through competitive dynamics. The authors conclude that ecosystems are complex systems that require a deeper understanding of their underlying mechanisms to fully grasp their value creation and capture dynamics. The research contributes to the strategy literature by offering a framework for understanding ecosystems and their role in competitive advantage.