Inter-firm Networks Research Articles

Interfirm network structure and firm resources: Towards a unifying concept

PURPOSE: The objective of this paper is to propose a concept of network resource distribution that systematically unifies the resource-based and network-based perspectives on interfirm networks and enables integrated analysis of how firm resources and network structure interact to affect firm performance. METHODOLOGY: This conceptual paper first reviews the extant literature on interfirm networks and then develops the unifying concept of network resource distribution. FINDINGS: The literature review indicates that strategy scholars have long sought to integrate the resource-based view and the social network explanations of firm performance but, thus far, only a partial integration has been achieved. In particular, studies on the resource-level heterogeneity of interfirm networks have largely been limited to the analysis of firm dyads. How firm resources and network structure beyond the immediate network partners interact to affect firm performance has not yet been adequately addressed. The proposed unified concept of network resource distribution systematizes prior research and illuminates how network structure and firm resources interact to affect firm performance beyond the immediate network partners. IMPLICATIONS FOR THEORY AND PRACTICE: For theory, this paper highlights gaps in the extant literature on interfirm networks and proposes a unifying concept that can be utilized to address these gaps and to develop further theory in the area. For practice, this paper encourages managers not to limit their analyses of strategic alliances to immediate partnerships; it is also crucial to consider the partners and their resources, and reflect on how they are related to one another outside of the immediate partnership portfolio. ORIGINALITY AND VALUE: Network resource distribution is a novel concept that ties together and systematizes various strands of research on interfirm networks, thus providing a foundation for future research in the area. The concept is also amenable to detailed operationalization, facilitating subsequent quantitative testing of theoretical arguments combining firm resources and the structure of a network.

Heterarchical Coordination in Inter-organizational Networks: Evidence from the Tourism Industry

Purpose – The aim of this paper is to report the results of a qualitative research on heterarchical coordination within an interorganizational network in the tourism sector. Design/Methodology/Approach – The study follows the qualitative approach and case study research design. The main data collection techniques were semi-structured interviews and document analysis. Data triangulation was used to collect and analyze qualitative research data and narrative form supported the presentation of the results. Findings – The study has shown the nature, strengths and weaknesses of heterarchical coordination within the distributed inter-firm network. Based on the study, heterarchy is an appropriate form of coordination for distributed inter-firm networks with a high proportion of SMEs operating in the tourism sector. Heterarchy supports a high level of engagement of focal firms in joint activities and emergent growth of the whole community. Originality of the research – The study brings a new overview of coordination mechanisms in interfirm networks and identifies the characteristics and conditions of heterarchical coordination in a distributed cooperative network. The results of the study are useful for scholars studying business networks as well as for managers and local authorities responsible for managing and supporting inter-firm networks in tourism destinations.

Managing Global Production Networks: Towards Social Responsibility via Inter-organizational Reliability?

Taking a whole network perspective, we theorize on whether and how global production networks can enhance their social responsibility by managing the inter-organizational relations that constitute such networks in a more reliable way. Combining insights from the literature on network governance and the management of inter-firm networks, we develop a practice-based perspective on how inter-organizational reliability, understood as the recurrent and effective collaboration of organizations in a network to ensure outcome quality, process stability and work safety, can be extended to issues of social responsibility in the area of labour standards. Our core argument is that creating and nourishing relations between lead firms and suppliers enhances not only inter-organizational reliability but can contribute to a higher degree of social responsibility in global production networks. For network management, i.e. selection, evaluation, allocation and regulation, this means paying more attention to where managing for reliability and responsibility in networks converges in practice. The task at hand for research is to improve our understanding of exactly how and under what conditions inter-organizational reliability contributes to network responsibility.

INTERFIRM NETWORKS AND ORGANIZATIONAL PERFORMANCE: A THEORITICAL REVIEW

The performance of firms globally is threatened by the dynamic business environment thus shifting competition from individual firms to networks of different firms. Recently, there is increased interest in the concept of inter-firm network as a viable strategy for survival and enhancing performance of organizations in such a competitive environment. In this strategy, different organizations cooperate in terms of research and development, business collaborations, virtual cooperation, knowledge base and social networking. Inter-firm collaboration is undertaken for a number of reasons which include sharing of know-how, joint action, building technological capacities, taking advantage of local marketing skills, decentralizing to be closer to local markets, building user-supplier networks, and taking advantage of knowledge spillovers from location-based proximity. It has been proposed that the adoption of this strategy by different organizations enables them gain competitive advantage because it has a positive impact on their market share and organizations also leverage on technology; thus producing a positive effect on their performance. However, extant theoretical and empirical literature is inconclusive on how to conceptualize interfirm networks, its dimensionality and measurement. Few studies, if any, have examined the role played by competitive advantage and legal framework in mediating and moderating the relationship between interfirm networks and organizational performance, respectively. Consequently, this study was conducted with the objectives of reviewing, conceptualizing and examining conceptual, empirical and theoretical literature; identifying theoretical and methodological gaps, and finally, proposing a conceptual model that would demonstrate the relationship between interfirm networks and organizational performance. Relevant theories underpinning the study were analyzed, various constructs and their operational indicators identified and compared against existing empirical work. The paper finally proposed that there is need to conduct an empirical study based on the proposed theoretical model to contribute to the advancement of knowledge in this area.

Foreign interfirm networks and internationalization: Evidence from sub-Saharan Africa

Abstract This study investigates how buyer-supplier interfirm networks with foreign affiliates affect the internationalization of local firms in developing countries. In a study of 1601 sub-Saharan African manufacturing firms, we find that foreign supply linkages positively influence firm internationalization, but this does not relate to marketing linkages. We further examine the role of absorptive capacity and find that both potential and realized absorptive capacity has positive and independent effects on firm internationalization. However, potential absorptive capacity has no moderating effect and realized absorptive capacity negatively moderates the relationship between foreign supplying networks and internationalization. Finally, implications for public policy and managerial practice are discussed.

Networking within Divisional Secretaries and its Impact on Organizational Performance (Special reference to Divisional Secretaries in Sri Lanka)

The networking among organizations and within the organization is very important to achieve vision, mission and the performance of any organization. Although there are studies about networking in a global context, it is hard to find networking related studies in the local context. Therefore, this study of networking within divisional secretaries and its impact on their performance is important. The main objective of this study is to analysis the networking within the divisional secretaries and its impact on the performance of those divisional secretaries. The studies depend upon the answers based on the questionnaire survey. Although the networks fall into two principal categories such as inter-firm networks and inter-personal networks, this study is limited to studying interpersonal network. The network is a vague concept and it consists of a set of actors (“nodes”) and the relations (“ties” or “edges”) between these actors. Relevant literature discussed to build the analytical framework and different theories of networking such as theories of self-interest, social exchange and dependency theory, mutual interest and collective action, a family of cognitive theories and theory of homophily. It reviewed the relevant literature on job performance and networking related performance. It also discussed the divisional administration and divisional secretaries. In this study impact of networking on the performance of divisional secretaries was measured with five independent variables such as instrumental network, expressive network, friendship network, advice network and knowledge network. Primary and secondary data were used to analyze the networking related performance. The survey was done throughout the all divisional secretaries in Sri Lanka via a questionnaire and collected data were analyzed by using Structural equation modelling (SEM). According to the study, the most important and affected networking activity which was highly affected by the performance is the knowledge network. Friendship network and instrumental network are the second and third networks effects on performance that is to follow on respectively. The expressive network has a moderate effect on performance while the advice network shows no positive effect on performance.

Effects of dual networks on tax strategies: geography and transaction

This study investigates how a revenue-maximizing tax strategy of local and central governments incorporates dual networks, namely, an inter-firm transaction network and an inter-country geography network. We assume a two-stage game in which governments propose discriminatory tax levels for firms, whereas each firm has an incentive to invest in a country near the foreign branch office of its transaction partner. In our model, the centrality index of the Kronecker product of the two networks describes the interplay among the location choices and tax strategies in the equilibrium. A stronger linkage within each network generally increases demand for investment and in turn raises overall tax levels to exploit the high demand. Although more central firms in the inter-firm network are likely to be levied higher taxes because of their high demand for investment, firms in the highest tax bracket differ among countries depending on their geographical location. Finally, we show that a uniform tax in which firms are not discriminated and networks do not matter is the socially optimal tax, which incorporates all inter-country externalities. We also investigate decentralized tax strategies based on the rule of non-discriminatory (uniform) taxation and show, by comparing social welfare under discriminatory and uniform tax regimes, that restricting tax discrimination improves social welfare.

Interfirm Transformative Capacity Within Global Value Chains

How do global value chains (GVCs) affect a firm's innovation impact? Working as international communities, GVCs are rich in knowledge and resource interchange. The prior literature has focused on knowledge absorbing or internal knowledge transfer within firms for in-house innovation. However, scant research has focused on promoting innovation across interfirm networks in a GVC context. This article develops a new concept of interfirm transformative capacity as a firm's ability to transfer developed technology knowledge across time, space, and firm networks. In this article, we explore three mechanisms of interfirm transformative capacity in GVCs: 1) choosing knowledge intermediaries, 2) transmitting and maintaining knowledge over time and space, and 3) reactivating and synthesizing knowledge. We predict that engagement in a lead firm's GVC, structural holes, and network centrality will affect a focal firm's innovation impact as a result of interfirm transformative capacity. Integrator suppliers have higher innovation impacts than modular suppliers. To test these three mechanisms, we build a novel dataset from a five-year panel of Apple suppliers and their patent impacts. The results support our hypotheses related to the mechanisms of interfirm transformative capacity. Our theoretical elaboration and empirical findings have significant implications for innovation policy within, and governance of, GVCs.

Do sourcing networks make firms global? Microlevel evidence from firm-to-firm transaction networks

This study investigates how the structure of a domestic firm-to-firm transaction network influences the foreign direct investment (FDI) decisions of embedded firms in the network. We theoretically describe firms’ FDI decisions using an incomplete information game that considers the firm-to-firm transactions of intermediate inputs and in which firms have an incentive to collocate with their trading partners in foreign markets. We show that the probability of a firm engaging in FDI increases with its Katz–Bonacich centrality, which is defined as aggregated accessibility to all other firms and represents expected profit gained from colocation with its partners. We empirically show that this prediction is supported using disaggregated inter-firm transaction network data on Japanese firms. We also extended both theoretical and empirical frameworks to consider the dynamic aspect of FDI. When we consider existing foreign affiliates, accessibility to prior investors in the transaction network, named Katz–Bonacich accessibility, positively influences FDI as well as Katz–Bonacich centrality.

The Motives and Selection Criteria of Korean Firms in Establishing Inter-Firm Network with Suppliers in Malaysia

This research, which focuses on Korean firms, aims to explore the intricacies of the network relationships between buyers and 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 fill the gap by exploring the motives and selection criteria of these firms. The findings revealed that there were three main motives for Korean firms to establish inter-firm networks with suppliers in Malaysia, which are locational decisions, low-cost sourcing, and easiness for procurement. Findings also showed that Korean firms select their suppliers based on seven criteria which are business structure, production capability, partner experience, quality policy, price competitiveness, business potential and relationship. The study suggested practical recommendations for potential suppliers of Korean firms in developing supplier-buyer relationships.

Influence of Inter-Firm Network Relationships on Circular Economy Eco-Innovation Adoption

Research has shown that inter-firm networks and relationships play a key role in innovation adoption; however, these concepts have not specifically been applied to study their role in the adoption of circular economy eco-innovations. This paper considers whether the embedded relationships within inter-firm networks also influence circular economy eco-innovation adoption. Using a historical case study of the REALCAR closed-loop recycling initiative, by Jaguar Land Rover, from 2013 to 2017, the paper conducted qualitative interviews to reconstruct the structure and nature of the relationships between Jaguar Land Rover and its suppliers. This was complemented with a network regression analysis to determine the influence of these relationships on the adoption and implementation decisions of the closed-loop recycling process by the suppliers of Jaguar Land Rover. The results show that Jaguar Land Rover’s relationship as a key customer, facilitation of knowledge sharing among peer suppliers, and resistance from suppliers impacted by changing supply chain relationships played a role in the adoption decisions and adoption timeframe of the REALCAR closed-loop recycling innovation. This has implications for companies and supply chains to consider leveraging the inter-firm relationships embedded in their supply chain networks to accelerate the adoption of circular economy eco-innovations.

Networks, institutional environment and firm internationalization

PurposeThe purpose of this study is to investigate the influence of network relationships and institutional environment on premium winegrowers’ internationalization process.Design/methodology/approachThis study uses a case study approach to examine two premium wine producers engaged in internationalization. The data sources consist of semi-structured interviews, observations at three major events and secondary data sourced from industry reports and materials that are available online.FindingsFindings illustrate that both personal and inter-firm networks help wineries to internationalize. Inter-firm networks play a significant role in gaining international legitimacy. Personal networks were found to be more important in establishing brand authenticity that facilitates wineries in their internationalization process. Gaining international legitimacy and establishing brand authenticity are crucial in the successful internationalization of premium wineries.Research limitations/implicationsThis study provides an explanation of how networks can be put into institutional context. Future studies could map out the formal and informal institutions within the wine industry and investigate the closer dynamics among the different actors in the whole network. A whole network is formally structured and governed, yet still built on the relationships among members, making it a very complex phenomenon. This would allow the evaluation of multilateral ties that link firms and actors within the network and how this affects the internationalization process.Practical implicationsThis paper provides managers with insights on how they can capitalize on their inter-firm and personal networks to help them deal with domestic and international institutional environments when embarking on internationalization activities.Originality/valueThis paper adds to the existing literature on networks relationships and provides an important link between networks, institutions and internationalization.

Understanding the Stickiness of Commodity Supply Chains Is Key to Improving Their Sustainability

Summary Commodity trade is central to the global economy but is also associated with socio-environmental impacts, for example, deforestation, especially in producer countries. It is crucial to understand how geographic sourcing patterns of commodities and commercial relationships between places and actors influence land-use dynamics, socio-economic development, and environmental degradation. Here, we propose a concept and methodological approach to analyze the geographic stickiness of commodity supply chains, which is the maintenance of supply network configurations over time and across perturbations. We showcase policy-relevant metrics for all Brazilian soy exports between 2003 and 2017, using high-resolution supply chain data from www.trase.earth . We find that the Brazilian soy traders with the largest market share exhibit stickier geographic sourcing patterns, and that the supply network configurations between production places and traders become increasingly sticky in subsequent years. Understanding trade stickiness is crucial for supply chain accountability, because it directly affects the effectiveness of zero-deforestation commitments.

Role of Interfirm Networks Related to Prototype Manufacturing in Machinery Industrial Agglomerations: Comparative Case Studies in the Kyoto and Yokkaichi Regions, Japan

Role of Interfirm Networks Related to Prototype Manufacturing in Machinery Industrial Agglomerations: Comparative Case Studies in the Kyoto and Yokkaichi Regions, Japan

Employment, innovation, and interfirm networks

This paper studies the employment impact of business network agreements, an innovative policy instrument introduced in Italy in 2010 to stimulate interfirm cooperation, with the aim of increasing innovative capacity and market competitiveness. We estimate the impact of these networks on employment for a panel of Italian firms using a system generalized method of moments and considering the literature on the employment impact of innovation. We find that networks, which can be interpreted as a form of open innovation, have a positive impact on employment; moreover, this impact appears positively influenced by sectoral and regional heterogeneity of firms and the region’s innovation capacities. Overall, the results suggest that participation in networks where firms share industrial, commercial, and technical knowledge improves firm performance, creating synergies that help firms, especially small and medium-sized enterprises, to manage the growing complexity of knowledge and the fierce competition arising from increasingly globalized markets. JEL codes : D85, J2, O36

Predicting Labor Market Competition: Leveraging Interfirm Network and Employee Skills

Human capital is a key component of the knowledge economy. Firms compete not only for consumers in the product market but also for human capital in the labor market. In this study, we perform an interfirm labor market competitor analysis using the online profiles of more than 89,000 employees and their career histories that span more than 3,000 public firms. Using these profiles, we characterize firms through the granular skill distribution of their employees. Also, using employee migrations across firms, we derive and analyze a human capital flow (HCF) network. Such information allows us to measure the interfirm human capital overlap in terms of similarity in their employees’ skills and HCF network structure. We show that our proposed human capital overlap metrics have superior predictive power over conventional firm-level measures in predicting future labor market competitors. We further demonstrate how our proposed metrics and the prediction framework can be incorporated into a comprehensive two-dimensional competitor analysis that includes both product and labor overlap between firms. By evaluating interfirm relationships in the product and labor markets simultaneously, this two-dimensional competitor analysis framework can help managers make strategic decisions beyond human resources, such as product development and customer relationship management.

Performance implications of using signaling and screening for expanding interfirm business networks: Evidence from franchising

Entrepreneurial business firms such as franchisors can enhance their network performance by attracting high-quality partners and preventing low-quality partners from joining the network. We draw on agency and transaction cost theories and the substantive literature on voluntary information disclosure to develop a theoretical framework that examines the consequences of using signaling and screening mechanisms for interfirm network performance. Our model posits a complementary effect for signaling and screening because of their ability to offset the disadvantages of each other. We empirically evaluate our hypotheses through econometric analyses of a unique multi-sector panel dataset from the U.S. franchising industry. We find that ex-ante signaling and screening at the contractual relationship formation stage are complementary mechanisms that enhance network performance when they are used together. Additionally, we find that specific investments by the focal firm and by the partners positively moderate the performance impact of screening and signaling respectively. Our findings suggest that the joint use of screening and signaling and their synchronization with specific investment commitments from each side can assist an entrepreneurial business network in mitigating the double-sided adverse selection problem at the formation stage of dyadic network partnerships and enhancing network performance.

Regional small businesses’ personal and inter-firm networks

PurposeThe purpose of this paper is to examine the role of personal and inter-firm networks and the elements that contribute to the formation and management of these networks for regional small businesses.Design/methodology/approachSemi-structured interviews were conducted with 20 small business owners located in regional areas.FindingsThe findings highlight key characteristics of regional small business owners’ networks. Findings indicated that participants relied strongly on their personal networks for business purposes. This study shows that while personal networks adapted and changed into informal inter-firm networks, weak-tie relations within inter-firm networks were unlikely to develop into close personal networks. Novel findings also include a preference for “regional interactions” and included regular collaboration with local business competitors. Although the participants used social media to manage their business through personal networks, results confirmed there was a lack of awareness of the benefits of inter-firm networks with businesses outside the local region.Originality/valueWhile it is acknowledged small business owners use personal and inter-firm connections to maintain and grow their business, there is a lack of research examining both of these networks in the same study. This research addresses this gap and presents five propositions as a useful direction for future research. This paper adds to the evolution of existing knowledge by expanding understanding of the formation of business networks and conditions of business trust relations within a regional context.

Industrial Clusters as Drivers of Sustainable Regional Economic Development? An Analysis of an Automotive Cluster from the Perspective of Firms’ Role

This paper examined the relationships among firms in a rapidly growing specialized industrial cluster—the Chery automotive cluster located in the Wuhu Economic and Technology Development in eastern China. After demonstrating how the Chery automotive cluster contributed to sustainable regional economic development, it focused on defining the roles that major firms play in the localized production network. Based on three attributes of the firm (network linkages, network position, and network power), the study identified a typology of firms’ role, including the dominant core, lead firms, gatekeepers, intermediaries, club of foreigners, peripherals, and loners. By revealing the heterogeneity of the firms and discussing the differing roles they play in the network, the paper made some policy recommendations to promote the sustainable development of the cluster, including providing policy supports to core firms, encouraging inter-firm networking and interaction, and diversifying the cohort of gatekeepers.

Hub firm transformation and industry cluster upgrading: innovation network perspective

PurposeThis research paper examines how hub firm transformation and restructuring of network partnerships shape the development of industrial clusters in China.Design/methodology/approachQuestionnaire data were collected from 210 managers (response rate 70.9 percent) from the manufacturing industrial clusters in Eastern China.FindingsThe results inform that a cluster’s hub firm transformation influences the evolution of the cluster. Though the hub firm may possess transformation capabilities, the cluster is likely to be weakened if network partnerships and resource synergy are not formed amongst the cluster members.Research limitations/implicationsThis paper, in examining the individual- and firm-level attributes of orchestration capability and their interactions, sheds light on the firm level and inter-firm level relationships between resources and innovation in an industrial cluster.Practical implicationsTo facilitate learning and the upgrading of firms within an industry cluster and promote a cluster’s innovation network, policymakers can initiate preferential policy measures to cultivate support to strategically transform a cluster’s hub firm, thus fostering cluster network growth.Originality/valueThe paper studies the evolution of clusters by investigating the hub firm transformation and member firm interaction. Focusing on the inter-firm network interactions lends a richer understanding of the nuances of the evolution of industrial clusters in Asia.