How do interorganizational and interpersonal networks affect a firm's strategic adaptive capability in a transition economy?

Abstract

This paper examines the effects of a firm's interorganizational network characteristics and a CEO's interpersonal network ties on a firm's strategic adaptive capability in a transition economy. Using a unique survey dataset of 250 Chinese firms, the paper focuses on the compositional diversity of a firm's interorganizational network and the structural holes in a CEO's interpersonal network. The results show that an interorganizational network that is diverse in composition and an interpersonal network that is rich in structural holes have significantly positive effects on a firm's strategic adaptive capability in China's transition economy. However, a negative interaction effect occurs between interorganizational network diversity and interpersonal network structural holes. The results suggest that managers simultaneously consider both the individual and joint effects of interorganizational and interpersonal network characteristics when developing firm strategies.