Inter-firm Networks Research Articles

The role of networks, competencies, and IT advancement in innovation performance of foreign-owned subsidiaries

While networks, competencies, and information technology are key factors to drive innovation performance, they are frequently investigated on a separate basis. Further, their interplay and contingency have hitherto received scant attention. We propose and empirically test a framework based on the configurational perspective encompassing prevailing network theory and the competence-based view of the firm. Survey data from 235 foreign-owned subsidiaries located in Singapore and Thailand was analyzed using fuzzy set qualitative comparative analysis technique. We found that information technology advancement and high overall competence levels are important asset bundles for the occurrence of high innovation performance outcomes. However, we also determined that it is important for some subsidiaries to maintain strong interfirm network relationships for innovation performance, especially in combination with higher information technology advancement. In addition, the role of network strength as a cause of innovation performance seems also dependent on the business environment and practices of the host country. In addition, we also show that innovation performance is an important factor facilitating market performance.

Interfirm networks and search-transfer problem: the role of geographic proximity

PurposeThis paper represents an empirical study of how geographic proximity influences the search advantage and the transfer problem of interfirm networks.Design/methodology/approachBy using the data collected from 226 Chinese manufacturing firms, this study examines the proposed hypotheses.FindingsThe authors’ findings suggest that (1) geographic proximity is an important antecedent for promoting knowledge transfer, whereas it lowers the degree of knowledge novelty; and (2) geographic proximity also moderates the effects of interfirm networks on knowledge novelty and knowledge transfer.Originality/valueThis study contributes the literature of interfirm network and provides practical implications by addressing the ways in which manufacturing firms can promote knowledge transfer and acquire novel knowledge.

Firms in financial distress: evidence from inter-firm payment networks with volatility driven by ‘animal spirits’

This paper elaborates an agent-based model of a pure market economy to provide theoretical evidence on how volatility-induced changes in inter-firm payment networks affect the financial distress of firms. This volatility is driven by ‘animal spirits’ in that it arises from the feelings of optimism/pessimism independently of rational decision-making, and influences the liquidity available to each firm through the inter-firm payment network; consequently, some firms may enter financial distress. The model first determines the inter-firm payment network. Then, a mean-reverting square-root process introduces volatility into the inter-firm payment network through firms’ propensity to pay suppliers according to the payments that firms expect to receive from customers. The model is calibrated for compatibility with relevant macro- and microeconomic stylized facts. According to computational experiments, financial distress in the business sector is minimized when feelings of optimism/pessimism generate the lowest volatility in firms’ propensity to pay suppliers. In addition, this volatility must materialize around an intermediate value of firms’ propensity to pay suppliers, and firms must keep this intermediate value over time.

Trust, Control, and Value Creation in Strategic Networks of SMEs

This paper investigates the role of trust and control in networks of small and medium-sized enterprises (SMEs), with a focus on both their direct and interaction effects on value creation. To delve into the interplay between trust and control, we unpack control mechanisms into three different forms: output, process, and social control. Our hypotheses are tested on a sample of 58 Italian SME networks based on formal agreements. Results show that the competitiveness and sustainability of inter-firm networks require trust-based relationships among entrepreneurs. Additionally, the adoption of output control mechanisms reinforces the positive link between trust and value creation, whereas a substitution effect exists between trust and process control and, with limited significance, between trust and social control.

Specificity of Pragmatism Evaluation of Interfirm-Relations between Enterprises at Network Structures in the Conditions of Business Macro Trends

Modern scientific research points to the fact that the enterprises at network structures are a kind of system that is formed of different components, which are related by various connections. In this context, it is quite relevant to study the assessment of inter-firm relationships of enterprises at network structures in the context of business macro trends. The article substantiates the list of indicators that can be used to assess the most important properties at network on the basis of existing economic relationships and determine certain of their limits, according to which they can be classified as network. It is established that the relationships should not be extremely rigid, as in this case they will be inherent in the hierarchically centralized business structures. It is investigated that the choice of system at indicators for assessing inter-firm relationships and establishing their upper and lower limits will allow based on statistical processing of source information to draw clear conclusions about the presence or absence at network structure. Based on this, it is established that indicative analysis can also be used to assess the dynamics at network, establish its type and study the transformation processes and draw conclusions. It is noted that the studied method of analysis relationships based on an indicative approach has the following disadvantages: the need to use to calculate the array of business information, the collection of which is problematic for managers of companies due to the significant time spent on it; fears of disclosing commercial information, as well as the advantages – ease of calculation at indicators and fairly high accuracy of assessment. It is established that for economically developed countries the tendency to form inter-firm networks on market principles with the use of decentralized mechanisms of coordination activities based on partnership trust prevails, the Ukrainian economy is dominated by hierarchical networks with centralized management. Keywords: enterprises of network structures, interfirm relations, evaluation indicators, partnership relations, interfirm networks.

Inter-organizational cost management: effects of antecedents and methods in a hybrid relational context

Purpose The antecedents and cost management methods and their effects on the value creation of inter-organization are essential topics of inter-organizational cost management (IOCM) in a hybrid relational perspective. This study aims to develop a synthesis coordinating mechanism theory which combines supply network theory and transaction cost economics. Using this modified theory, a structural model of IOCM and its hypotheses are developed by considering the organic connection among hybrid relational context, capabilities, methods and the effects of IOCM. Design/methodology/approach The data were collected under convenient sampling using the questionnaire survey method and analyzed using principal component analysis and structural equation modeling. Findings The results (significant at p < 0.01 and p < 0.05 level) show that there is a positive correlation among the hybrid relational context, capabilities (antecedents), methods and the effects of IOCM. Capabilities (antecedents) and cost management methods are also found to have a positive impact on synergic effect value and on improving collaborative efficiency in IOCM. Practical implications The managers of inter-firm networks may use the results of this study to ensure competitive advantages through collaboration with each other and building and retaining a long-term relationship. Originality/value This study demonstrates that the coordinating mechanism of IOCM can create the synergic effect value and improve the collaborative efficiency of the inter-organization relationship.

The Power of Japanese Film Production Consortia: The Evolution of Inter-Firm Alliance Networks and the Revival of the Japanese Film Indsutry

After long-term downturn of sales of Japanese films and dominance of Hollywood films in the Japanese film market during 1960’s and 1980’s, Japanese film industry revived from the latter part of 1990’s with evolution of interfirm film production and distribution alliances. In Japanese film industry, many of successful box-office films are currently produced and distributed under inter firm alliances across industries, which are called as a “film production consortium. (FPC)” In many of these cases, several major television broadcasting companies tend to form film production consortia, organizing several major firms across media industries including a film distribution company, a publisher of an original text or comic, an ad agency, a talent agency and other supporting companies (i.e. a nation-wide retailer or a videogame company). This chapter attempts to describe origin, main functions, history, current conditions and implications of a production consortium, growth of interfirm alliance networks mainly within media industries and new roles of producers to drive it. It also tries to explain reasons of its evolution and analyzes facing problems. We will argue these topics in following four parts, referring typical cases and major statistical trends. First, film production consortia have formed interfirm film production networks and become valuable social capital for box-office film production, mainly providing original texts and comics, funding money, excellent talents, new moving picture technology, media-mix promotion and multi-use of characters and moving pictures across media for film production. Second, a film production consortium increased from the middle of 1990’s, formed by several major television broadcasting companies, showed outstanding box-office sale and developed new character business. Third, within these interfirm networks, producers learnt new alliance capabilities to sequentially organize different combinations of production consortium. Finally, we will discuss current conditions of film production consortium, arguing that it becomes popular routines and show some difficulties to produce novel film projects. However, in considering global managerial implications, a film production consortium may give new business opportunities of multi-use of films across industries.

Network resource meets organizational agility

PurposeThe purpose of this paper is to propose that a firm could exploit the ties of interfirm network to access external network resources (NR) to assist its sensing and responding capabilities for the variability of business environment, thereby leading to superior organizational performance.Design/methodology/approachThis study uses the survey data collected from 260 small- and medium-sized enterprises (SMEs) in Taiwan to examine the causal effects of hypotheses testing. By adopting structural equation modeling technology, the direct and mediating effects among the NR, sensing capability (SC), responding capability (RC) and firm performance (FP) are explored.FindingsThe result of this paper shows that a firm’s NR and its organizational capabilities are critical antecedents of FP. Moreover, the mediating testing identifies NR and FP as being mediated by a firm’s organizational agility (OA) and RC.Practical implicationsThe findings of this paper provide practical evidence that a SME could gain benefits and advantages from the joint effect of integrating NR and OA to compete with global conglomerates. Thus, a SME must put more effort into developing and maintaining its interfirm network and then figuring out its effect with its internal agility process in order to surmount unexpected changes, create advantages of the first-mover and innovation activities and boost the FP.Originality/valueThis paper combines external NR and internal OA and offers a practical strategy to a SME, creating a unique competitive advantage for further development in a dynamic business environment.

The Benefits and Challenges of Korean Firms in Establishing Inter-Firm Network with Suppliers in Malaysia

This study aims to explore the benefits and challenges of the inter-firm network relationships between Korean firms as buyers and their suppliers. Since the influence and strategies of the inter-firm network of overseas Korean firms have not been satisfactorily explored yet, this study attempts to contribute to the body of knowledge by exploring the benefits and challenges of inter-firm network for Korean firms in Malaysia. The results of this study highlights seven benefits of Korean firms having inter-firm networks: improved lead time and availability, ease of communication, long-term relationship, lower stock holdings at Korean multinational corporations or other MNCs (end-user), routine material information, trust relationship, and information sharing. In contrast, Korean firms also face challenges which include difficulty in terminating partnership, high dependence on one company, buyers’ superiority over the suppliers, a network of different strengths of suppliers, and connecting with the business through an informal network. The study suggests practical implications to be anticipated by potential suppliers of Korean firms in developing successful supplier-buyer relationships.

A Multiplex Network Perspective of Innovation Diffusion: An Information-Behavior Framework

Information transmission of innovation and peer effect among firms have significant impacts on innovation adoption decisions of firms, but those effects usually depend on the different types of inter-firm networks. Therefore, the diffusion of innovation (DOI) can be regarded as a process occurring in complex systems composed of different types of interactions, which can be categorized into links belonging to different layers of multiplex networks. This study aims to shed light on the complexity of innovation diffusion from the perspective of an information-behavior framework based on multiplex networks. The process of technology innovation adoption is formulated into two stages including information perception and decision making, and a novel innovation diffusion model based on duplex inter-firm networks, in which one layer has influence on information transmission and the other carrys the peer effect, is further proposed in this study. The simulation experiments indicate that the random-scale-free duplex networks are favourable to the diffusion speed while scale-free-scale-free duplex networks are conducive to the diffusion range. Moreover, within the scale-free-scale-free duplex networks, the diffusion speed will increase with the increasing of the power law index in the information network and decrease with the increasing of the power law index of the behavior network. The study contributes to the literature by establishing duplex network model that distinguishes links between information and behavior networks, and offers insights concerning optimization of network configuration in the promotion of DOI.

Managing Network Resource and Organizational Capabilities to Create Competitive Advantage for SMEs in a Volatile Environment

By considering embedded opportunities and threats in today's dynamic business environment, this study proposes that small‐ and medium‐sized enterprises (SMEs) can exploit the ties of interfirm networks to access external resources and information, thus enhancing their organizational agility and absorptive capacity in a variable business environment and enabling superior organizational performance. This study enables SMEs to combine the external resources embedded in strategic networks with internal organizational capabilities including organizational agility and absorptive capacity to create an idiosyncratic competitive advantage in a chaotic business environment.

Networking policy and firm performance

AbstractThis paper evaluates the effects of inter‐firm networks (IFNs) on firms’ economic performance. This policy instrument has been implemented in Italy from 2009 to support mostly small and medium‐size enterprises after the great economic crisis of 2007–2009. Starting from an original database of Italian manufacturing and service firms for the period 2010–2017, the paper develops in two steps: the first part, with “difference‐in‐differences” technique, is highlighted the positive effect on firms’ performance for those firms involved in an IFN. The second part investigates which characteristics of the IFN have better impacts on firm’s performance in the medium long‐run. This study contributes to the network policy literature by revealing another instrument to foster cooperation and increase firms’ innovation and internationalisation, without the need to be geographically bounded.

The role of relationship scope in sustaining relational contracts in interfirm networks

AbstractResearch summaryA key strategic decision for many firms is the scope of their relationships with partners. Existing theories of relationship scope are limited in that they disregard the facts that: (a) most firms transact within networks of multiple partners, and (b) these partnerships often involve two‐sided moral hazard. We develop a theory of partnership scope in interfirm networks that addresses these deficiencies. We show how, by broadening the scope of business it conducts with its partners, a firm can reduce externalities between them, and thereby sustain self‐enforcing exchange relationships (“relational contracts”) in which both parties cooperate with each other repeatedly and maximize the value created. We discuss numerous settings in which our model applies, including franchising, supply chains, and platform‐based ecosystems.Managerial summaryA key strategic decision for many firms is the number of transactions or activities they conduct with a given supplier, business customer, or company that sells complementary products or services. We offer a theory to explain why firms often prefer relationships with broader scope. Whereas other theories are based on the ability to leverage partner knowledge or cheaper supervision, our theory is based on the concept of a “relational contract”, in which a firm and its partner cooperate with each other repeatedly according to an informal agreement between them. We show that under relational contracting, broader scope relationships encourage better mutual cooperation than narrow scope relationships, thereby maximizing the value created by them. We discuss how our model applies to franchising, supply chains, and platform‐based ecosystems.

Inter-firm collaborations to make or to buy innovation

ObjetivoO objetivo deste artigo é estudar como as redes de colaboração entre empresas estão relacionadas a diferentes estratégias de inovação seguidas pelas empresas. Em particular, concentra-se na chamada distinção entre comprar e fazer inovação.Design/metodologia/abordagemO artigo estuda o cluster industrial de borracha e plásticos do Uruguai, localizado nas regiões metropolitanas de Montevidéu e Canelones. Os dados foram obtidos a partir do trabalho de campo, através de 118 entrevistas face-a-face aplicadas a diretores executivos de empresas. Ele combina análise de redes sociais com técnicas de regressão logística para determinar como a posição nas redes de colaboração influencia as estratégias de inovação.ResultadosOs resultados provam que a rede tem efeitos diferentes pelo tipo de estratégia de inovação: a centralidade dos graus das firmas (isto é, ter muitos links diretos) facilita a compra de inovações externas, enquanto a centralidade entre as posições (estando localizada em uma posição estratégica na rede) é positivamente associado com a inovação dentro da empresa.Originalidade/valorO artigo fornece uma contribuição relevante para a literatura sobre redes de inovação, elucidando a relação entre diferentes formas de colaboração e diferentes estratégias de inovação. Além disso, faz uma contribuição especial, concentrando-se em inovações e interações entre firmas dentro de um caso típico de uma indústria de baixa tecnologia criada sob o chamado modelo de industrialização liderado pelo Estado.Palavras-chaveAnálise de redes sociais, Inovação, Indústrias de baixa tecnologia, Cluster industrial, Borracha e plásticos, Uruguai

Impacts of Strategic Similarities on Knowledge Flow in Inter-Firm Networks in Emerging Industry

This paper explores the impacts of strategic similarities on knowledge flow in emerging industry from a network perspective. This paper puts forward a conceptual model of the effect mechanism of st...

Interfirm Collaboration and Firm Value in Software Ecosystems: Evidence From Cloud Computing

In a rapidly evolving cloud computing industry, legacy software vendors are racing to transform their existing business models to compete against both established and emerging cloud “native” software vendors. To cope with these challenges, vendors are forming partnerships with other firms to access and leverage new and complementary resources, capabilities, and knowledge. Building on prior work on two traditionally distinct literature streams—interfirm networks and software ecosystems—we theorize that structural characteristics of a software vendor's partner network can influence its firm value. Specifically, we argue and find empirical support that partner network size, interconnectedness, and diversity impact firm value, measured by market capitalization for publicly listed firms and total funding for privately held firms, and that the association between structure and firm value differs by vendor type (legacy versus cloud-native). We explore these associations using a data-driven ecosystem analysis of 5429 firms, apply text analytic methods to differentiate vendors by technology stack focus (infrastructure, platform, software), and complement our empirical analyses with visualizations of the collaborative structure of the cloud computing ecosystem. We conclude with theoretical, methodological, and managerial implications.

Life below excellence: exploring the links between top-ranked universities and regional competitiveness

ABSTRACT This paper examines interactions between the presence of top-ranked universities and other conditions that encourage regional competitiveness. Fuzzy-set qualitative comparative analysis (fsQCA) was conducted to assess the combined effect of the conditions. The analysis yields several noteworthy conclusions. First, no single condition is necessary for a region to be competitive. Second, R&D expenditure is important for regional competitiveness. Third, different configurations of conditions are sufficient for high competitiveness in different regional clusters. Furthermore, some of these configurations do not include the presence of top-ranked universities. A ‘magic recipe’ consists of the combination of a private research system, an inter-firm collaboration network and high levels of human capital. The analysis shows that university excellence is valuable. However, in terms of its contribution to regional development, it is not crucial and must always be contextualised. This conclusion is important for smart strategic planning of local knowledge systems.

Attenuating the negative effects of network change on innovation: A whole network level analysis of Taiwanese business groups

This paper investigates when and how changes in interorganizational networks affect innovation at a whole-network level. We consider three forms of network change as suggested by prior research on networks: membership change, change in network structure, and tie restructuring. We examine the independent and interactive effects between membership change and other types of network changes on group innovation. Our longitudinal analyses of the intra-group network changes in Taiwanese business groups show that membership change in the intra-group networks has a negative effect on group-level innovation. However, the negative effect is attenuatedwhen the centralization of intra-group networks decreases and when ties involving hub firms are reconfigured. The findings provide implications for both inter-firm network governance and innovation management, especially in the context of business groups.

CFO Outside Directorship and Financial Misstatements

SYNOPSIS I study an important accounting consequence—financial misstatements—of CFO outside board membership. I find that firms with CFOs holding outside directorships have a lower likelihood of misstatements. These results likely reflect the benefits accruing to CFOs' home firms in terms of improved financial reporting quality. These findings are based on several methods that control for unobserved factors that may affect both incidence of CFO outside directorships and a firm's financial misstatements. I also provide some preliminary insights into CFO and home firm characteristics that determine CFO outside board directorships. My findings are consistent with the inter-organizational embeddedness perspective, suggesting that inter-firm networks provide sources for counseling and learning opportunities, which executives can use to improve their home firms' performance. JEL Classifications: M41.

The Impact of Network Centralization on Relational Capital

With an increasing degree of connections among firms forming network of economic activities, it is timely to assess the potential of these upon embedded firms. This article presents empirical evidence to that end. It distinguishes between decentralized and centralized network structure that illustrate the difficulties encountered in managing an inter-firm network structure. Although considerable studies has been performed in network issues affecting firms performance, very few research analyse the complicating attributes of a centralized network structure on its effects on firms performance. Thus this article described different attributes of the centralized network and its effects on firms’ relational capital outcomes. Using social network analysis methodology this study found that certain structural position occupied by firms in network impacts on its relational capital outcome. This study is significant as it’s contributed to prudent management of resources in managing complex network structure. Future research is also discussed.