Inter-firm Ties Research Articles

Inter-Firm Managerial Social Ties, IT Supplier Selection and IS Complexity

By combining the theoretical lenses of social embeddedness, agency problem, and inter-firm relationship formation, this study investigates the impact of focal firms’ inter-firm managerial social ties (IMST) on the firms’ selection of IT suppliers and the consequences of such IT supplier selection. We use a dyad-level analysis to examine how IMST may drive a focal firm to select an individual IT supplier and use a firm-level analysis to examine how social connections through IMST may affect focal firms’ choices of IT suppliers that influence their organizational IS complexity. Our findings suggest that, at the dyad-level, IMST between a focal firm and an IT supplier significantly increases the firm’s likelihood and intensity of using this supplier. Furthermore, firms socially connected with more IT suppliers through IMST tend to use more IT suppliers in total. Our results also show that for firms possessing broader social connections with more IT suppliers and more diversified IMST, the increase of their total IT suppliers is associated with a greater escalation of their organizational IS complexity, suggesting a potential agency problem in socially driven IT supplier selection. The study generates important implications that contribute to multiple streams of research on social embeddedness, IT supplier selection, and IS complexity.

Insights to technological alliances and financial resources as antecedents of high‐tech firms' innovative performance

High‐tech firms are triggered to externally acquire and combine additional supplementary and complementary resources to develop innovative capabilities and generate new knowledge, products, and business ideas. Firms may rely on cooperation, alliances, and other interfirm ties as well as on the external acquisition of the stock of resources and capabilities to foster their innovativeness and support their patent activity. This contribution develops and tests a conceptual framework for assessing external sources of a firm's innovative performance in high‐tech industries. By simultaneously evaluating the explanatory power of technological alliances and financial resources in shaping a firm's innovative performance, measured as new patents registered, the paper provides some original outcomes from both conceptual and methodological perspectives. Research hypotheses are tested performing ordinary least squares (OLS) regression models on 90 European‐listed firms operating in the aerospace and defence industry, engaging over 1,300 technological alliances within the 2007–2011 timeframe. The findings demonstrate that high‐tech firms leverage on technological supplementary alliances to innovate and to create new knowledge embodied in artifacts such as patents. In addition, financial slack is proved to be a prerequisite for a successful patent activity in high‐tech industries. Empirical outcomes, discriminating between small and large firms, bring valuable insights both for academics and practitioners.

"Diversification, Inter-Firm Ties, And Firm Failure In The U.S. Venture Capital Industry"

This study examines how firms’ level of diversification and inter- firm ties affect the risk of failure in a knowledge-based industry. Drawing on organizational knowledge and learning literature we...

"Interorganizational Collaboration, Intraorganizational Networks, and Firm Innovation"

This study investigates how firm innovation is jointly influenced by two levels of collaboration. At the interorganizational level, collaboration via interfirm alliances and joint ventures is an important method for accessing external knowledge and information. At the intraorganizational level, intrafirm collaboration among R&D scientists is a significant mechanism for knowledge transfer and diffusion. Both forms of collaboration are known to influence firm innovation, but little is known about their joint impact. I argue that interorganizational collaboration provides an opportunity for absorbing new knowledge while intraorganizational collaboration networks shape a firm's ability to use and exploit this information. A longitudinal study on almost fifty medical device firms over a fifteen year period shows that the positive effect of interfirm R&D alliances on firm innovation is stronger for firms with better connected intrafirm collaboration networks, whereas the presence of strongly-connected groups within a firm weakens this relationship. These results suggest that firm innovation is the outcome of a multilevel network process in which interfirm ties are complemented by intrafirm networks.

Building entrepreneurial inter-firm networks in an emerging economy: the role of cognitive legitimacy

We take an organizational legitimacy perspective and use data from a large-scale nationally representative study on the state of small business in Saudi Arabia, in order to explore the antecedents to the formation of entrepreneurial ventures’ inter-firm networks in the context of an emerging economy (n = 331). We argue that entrepreneurial ventures need to overcome a threshold of cognitive legitimacy in order to develop inter-firm ties with a diverse set of large, established firms. Results indicate that having a written business plan and a formal organizational structure are positively associated with the diversity of the new venture’s inter-firm network, while the education level of the entrepreneur does not have a significant effect. In addition, the effect of having a formal organizational structure is stronger for younger ventures. Implications are discussed.

Resource idiosyncrasy, performance, and inter-firm small-world networks

Purpose – Many networks take a small-world structure, with a high degree of clustering and shortcut ties that reduce the path-length between the clusters. It can be argued that small-world networks have benefits that are simultaneously related to network closures and the spanning of structural holes, but research on the network members’ performance is nonetheless inconclusive. The purpose of this paper is to argue that the concept of resource idiosyncrasy can explain the mixed findings. Firm idiosyncratic resources are not easily generalizable across enterprises. Design/methodology/approach – Industries may vary in terms of resource idiosyncrasy, and the paper elaborates how this can moderate shortcut ties’ effect on performance in an inter-firm network. Findings – If resource idiosyncrasy predominates in an industry, the paper proposes that inter-firm shortcut ties may increase performance, whereas shortcut ties may decrease performance if non-idiosyncratic resources predominate. Originality/value – Applying the concept of resource idiosyncrasy as a moderating variable, the paper aims to explain shortcut ties’ effect on performance in an inter-firm network. The theory advanced here can have practical implications and also motivate future empirical studies to gain further knowledge about small-world networks’ effect on performance.

Cluster Size: A Critical Determinant of Network Strategy and Innovation Performance

This paper examines two research questions: (1) how the size of regional cluster in which focal firms are located affects the member firms’ decision on network configuration in terms of tie strength and (2) how the network configuration influences their innovation performance. We argue that as firms are located in a larger cluster, they use weak ties more preferentially because the information and control benefits of cluster membership reduces firms’ incentives to form strong ties. We also claim that the positive effect of this preferential usage of weak ties on innovation becomes stronger as firms are located in a larger cluster. Our arguments were supported by panel analysis of the interfirm ties formed by the U.S.-listed semiconductor firms from 2000 to 2007.

The Role of Ambidexterity and Vacillation on Firms' Innovation: an Inter-firm Network Perspective

This article examines the underexplored balancing between exploration and exploitation in inter-firm network dimension by applying an ambidexterity and vacillation behavior and how this impacts on different firm’s innovation performances. We propose reconciliation between exploration and exploitation within a network of inter-firm ties, by matching two specific structural network embeddedness positions that are centrality and structural holes. We observe how a firm reconciles exploitation and exploration in their inter-firm networks by adopting two different behaviors, ambidexterity and vacillation. According to the former a firm statically assumes in the same time a network position characterized by high level of centrality and structural holes. Following the second behavior, a firm dynamically shifts from network positions characterized by high level of centrality/ structural holes to strong centrality/structural holes positions. By observing a network of inter-firm relationships between 3125 firms for ten years (2001-2010) in the biopharmaceutical industry, we empirically show how ambidexterity and vacillation behaviors positively impact the innovation performance of the firm, both from a new product and patent propensity point of views.

Automobile industry, guanxi, and social networks in China

Purpose – The purpose of this paper is to examine the factors that affect the stability of interfirm trading ties in China's transitional economy. In particular, the paper explores whether the propensity to engage in repeat transactions with past partners is attributable to rational choice based on expectations for the benefits of social capital, or an outcome of institutional pressure that binds firms sharing similar positions within the institutional structure bequeathed from China's socialist past.Design/methodology/approach – This study utilizes data on the actual trading ties between 32 final vehicle assemblers and 477 parts and components suppliers in the auto industry during the period from 1998 to 2005. Using logistic regression analysis, the study highlights the factors that lead to the greater likelihood of repeat transactions between a particular pair of assemblers and suppliers.Findings – The result of the analysis suggests that while rational motives, such as transaction cost economization, d...

Knowing-about & Knowing-how: Impact of interfirm ties in the context of environmental strategies

This study compares the different logics of knowledge transfers between organizations through interlocks and alliances and their potentially different impact on corporate strategies. We argue that alliances are better apt than interlocks for the adoption of strategies that require ‘knowing-how’ resources, for example exploitation and exploration strategies. In contrast, we expect interlocks to be more suited than alliances for the imitation of strategies that can be implemented by rather ‘knowing-about’ information. We integrate the characteristics of each tie’s knowledge transfer, learning opportunities, and impact on the adoption of strategies in a conceptual framework and found strong empirical support for our hypotheses in the context of environmental strategies.

Mapping China's 3G market with the strategic network paradigm

This paper explores the inter-firm linkages of China's 3G market players by applying the strategic network paradigm. The 3G strategic network mainly consists of mobile operators, content/application providers, service providers, handset manufacturers, mobile phone dealers, network equipment manufacturers, chipmakers, the government, and customers. Building from the strategic network concept, this paper identifies some of the features of China's 3G market. More new inter-firm ties have been established in the 3G era, while some old ties have been reshaped. Some firms have multiple positions or roles in one strategic network, which results in competition between former partners in the 3G market. Many firms choose to participate in more than one strategic network to exploit scope economies and mitigate the risks of being stranded on a sinking ship. China's government not only determines the initial status of the strategic networks, but also makes policies that affect the evolution of the 3G strategic networks.

How do new ventures in MNC ecosystems proactively overcome interfirm asymmetries?

Several contemporary large multinational corporations (MNCs) have developed interfirm ecosystems that are likely to attract a heterogeneous set of actors, including new ventures. New ventures are asymmetric vis-à-vis the focal MNC in terms of organisational size, structure and power which could be an impediment to the development of social capital between these sets of firms. And yet MNCs are potentially a source of novel information, opportunities and ideas. An interesting question to consider therefore is how new ventures overcome interfirm asymmetries to develop and leverage social capital with large MNCs. Our synthesis of the academic literature suggests that some new ventures are more adept than others at partnering with MNCs because they are more proactive in forming and leveraging interfirm ties with large MNCs. Insightful observations of four panellists shed light on how startups’ proactive behaviours can be vitally important in forming, consolidating and extending relationships with large MNCs.

Radical and incremental entrepreneurial orientation: The effect of knowledge acquisition

AbstractA firm's collaborative context can represent an important source of knowledge for sustaining its entrepreneurial outcomes. Drawing on entrepreneurship and resource-based view literature, we study how the acquisition of knowledge from inter-firm ties affects the relationship between entrepreneurial orientation and performance, distinguishing between two types of knowledge, market and technological, and between two types of entrepreneurial orientation, radical and incremental. The results of the study on a sample of 203 Spanish small businesses from the Information and Communication Technology (ICT) sector suggest that knowledge acquisition plays different roles, depending on the type of entrepreneurial orientation developed and also on the type of knowledge exchanged. In particular, market and technological knowledge acquisition positively moderate only the relationship between radical entrepreneurial orientation and performance, while in the case of incremental entrepreneurial orientation we find only a direct positive influence of market knowledge acquisition on performance.

Radical and incremental entrepreneurial orientation: The effect of knowledge acquisition

AbstractA firm's collaborative context can represent an important source of knowledge for sustaining its entrepreneurial outcomes. Drawing on entrepreneurship and resource-based view literature, we study how the acquisition of knowledge from inter-firm ties affects the relationship between entrepreneurial orientation and performance, distinguishing between two types of knowledge, market and technological, and between two types of entrepreneurial orientation, radical and incremental. The results of the study on a sample of 203 Spanish small businesses from the Information and Communication Technology (ICT) sector suggest that knowledge acquisition plays different roles, depending on the type of entrepreneurial orientation developed and also on the type of knowledge exchanged. In particular, market and technological knowledge acquisition positively moderate only the relationship between radical entrepreneurial orientation and performance, while in the case of incremental entrepreneurial orientation we find only a direct positive influence of market knowledge acquisition on performance.

Close but not committed? The multiple dimensions of relational embeddedness

This research addresses the complexity of embedded inter-firm ties. Based on both qualitative and quantitative data from field research in the computer motherboard manufacturing industry, this paper investigates the origins of close ties and committed relationships, and explores the relationships between these two dimensions of embedded inter-firm relationships. The results show that companies establish close relationships with their partners to resolve coordination uncertainty due to a high level of task interdependence in their exchanges, and that firms become more collaboratively committed when they seek to alter a disadvantaged power asymmetry. At the same time, the fieldwork found an underlying conflict between the embeddedness dimensions of closeness and commitment: too much closeness reduces a partner’s commitment. These findings have significant implications for the formation of embedded corporate ties as well as the effects of embeddedness on organizations.

Elucidating strategic network dynamics through computational modeling

In this study we describe a comprehensive computational model of network dynamics (COM-NeD) and demonstrate how it may help us better understand and theorize the dynamics of strategic networks. Specifically, we model a population of firms characterized by idiosyncratic resource needs and productive capacities, while having to respond to the demands of external events by establishing ties and receiving needed resources from other firms. Through COM-NeD we investigate a set of established theoretical perspectives that represent distinct strategies for seeking and establishing interfirm ties. Rigorous computational experiments demonstrate the expected behavior of such a system under a broad range of assumptions. The results shed light on the complexity of strategic network dynamics, demonstrating novel interactions of firms' internal resource capacity, relational search approaches, and external resource growth.

Clans for Markets: The Social Organization of Inter-Firm Trading Relations in China's Automobile Industry

AbstractThis article addresses one of the institutional elements identified as essential to modern capitalism, but which has received little research attention, that is, the “freedom of the markets.” Through an analysis of inter-firm trading ties for the procurement of intermediate products in China's automobile industry, this article demonstrates that to a significant extent the exchange structure remains bound by particularistic networks of trading between institutionally tied actors. It also shows how the resultant “dualism” in market networks, which discriminates between actors sharing particularistic ties and those that do not, is derailing the rational development of the industry by sustaining a “cellular” pattern of industrial development. The case of the auto industry suggests that it may specifically be the large-scale, modern industrial sectors – which require resources to be mobilized and actors to be co-ordinated at vast scale and scope – where the need for the “rational capitalistic establishments” are greatest, and therefore the failure to institute them may constitute a real hurdle to development.

Network structure and innovation: The leveraging of a dual network as a distinctive relational capability

AbstractThis paper employs comparative longitudinal case study research to investigate why and how strong dyadic interfirm ties and two alternative network architectures (a ‘strong ties network’ and a ‘dual network’) impact the innovative capability of the lead firm in an alliance network. I answer these intrinsically cross‐level research questions by examining how three design‐intensive furnishings manufacturers managed their networks of joint‐design alliances with consulting industrial design firms over more than 30 years. Initially, in order to explore the sample lead firms' alliance behavior, I advance an operationalization of interorganizational tie strength. Next, I unveil the strengths of strong ties and the weaknesses of a strong ties network. Finally, I show that the ability to integrate a large periphery of heterogeneous weak ties and a core of strong ties is a distinctive lead firm's relational capability, one that provides fertile ground for leading firms in knowledge‐intensive alliance networks to gain competitive advantages whose sustainability is primarily based on the dynamic innovative capability resulting from leveraging a dual network architecture. Copyright © 2007 John Wiley & Sons, Ltd.

The Role of Network Resources in Market Entry: Commercial Banks' Entry into Investment Banking, 1991–1997

This study focuses on the roles of interfirm ties and network status in firms gaining access to customers in newly entered markets, examining whether these network resources are transferable and therefore can be deployed outside the market in which they originated. The role of market ties and network status is examined in a comprehensive longitudinal sample of commercial banks' entry into investment banking from 1991 to 1997. Results show that though market ties and network status facilitate market entry, the importance of network status decreases in the presence of market ties, and the value of network status, unlike market ties, decreases over time after market entry and is less important to customers with more market experience.

Is Vertical Co-Ordination an Effective Response to Economic and Technological Ties in Industrial Purchasing Relationships?

ABSTRACT Vertical co-ordination of business-to-business relationships figures prominently as an effective response to inter-firm dependence. Current empirical works based on transaction costs economics, however, have scantily examined whether the alignment of inter-firm coordination really serves governance efficacy and lowers transaction costs. This study focuses on the transaction costs efficacy of vertical co-ordination in industrial purchasing relationships. Building on transaction costs arguments and related works within marketing and contingency theory, the author explores whether vertical co-ordination is an effective means to adapt to technologcal and economic inter-firm ties. This research examines in particular possible impacts the buyer's manufacturing technology and deployment of specific assets on the governance efficacy of vertical co-ordination. Empirical findings from a survey of 171 industrial buying firms demonstrate that when asset specificity is substantial, increased vertical co-ordination reduces ex post transaction costs. Further, the governance efficacy of inter-firm co-ordination turned out to be more evident in purchasing relationships among buyers with flexible manufacturing technology (e.g., order based industries) than was the case in process production with high workflow rigidity.