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

This 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.     

Knowledge spillover in corporate financing networks: embeddedness and the firm's debt performance

Building on social embeddedness theory, we examine how the competencies and resources of one corporate actor in a network are transferred to another actor that uses them to enhance transactions with a third actor—a strategic process we dub ‘network transitivity.’ Focusing on the properties of network transitivity in the context of small‐firm corporate finance, we consider how embedded relations between a firm and its banks facilitate the firm's access to distinctive capabilities that enable it to strategically manage its trade‐credit financing relationships. We apply theory and original case‐study fieldwork to explore the types of resources and competencies available through bank–firm relationships and to derive hypotheses about how embedded bank–firm relationships affect the strategy of small‐ to medium‐sized firms. Using a separate large‐scale data set, we then test the generalizability of our hypotheses. Our qualitative analyses show that embedded bank–firm ties provide special governance arrangements that facilitate the firm's access to bank‐centered informational and capital resources, which uniquely enhance the firm's ability to manage trade credit. Consistent with our arguments, our statistical analyses show that small‐ to medium‐sized firms with embedded ties to their bankers were more likely to take lucrative early‐payment trade discounts and avoid costly late‐payment penalties than were similar firms that lacked embedded ties—suggesting that social embeddedness beneficially affects the financial performance of the firm. Copyright © 2002 John Wiley & Sons, Ltd.     

Do ongoing networks block out new friends? Reconciling the embeddedness constraint dilemma on new alliance partner addition

Research Summary: This study addresses a theoretical dilemma regarding how alliance network constraint (reflected by network cohesion) affects a firm’s alliance formation with new partners. Using a network pluralism approach, we separate a firm’s ego alliance network into two activity‐based networks—an exploratory network and an exploitative network—based on the primary value chain activity involved in each alliance. We argue that the cohesion of exploratory or exploitative networks has an inverted U‐shaped effect on the addition of new partners in the same activity‐based network, and a positive effect on the addition of new partners in the other network. Results based on data from the biotechnology industry largely support our predictions with one exception. Our study contributes to both scholarly understanding of network embeddedness and alliance practice. Managerial Summary: The structure of firms’ ongoing alliance networks may have paradoxical implications for their efforts to search for and form alliance with new partners. That is, when a firm’s alliance partners are tightly connected with each other, the cohesive network tends to both encourage and impede the focal firm to add new partners. We resolve this dilemma by showing that when a firm is deeply entrenched in a cohesive alliance network conducting a certain type of activities (e.g., R&D activities), it may not easily add new R&D alliance partners. However, it may still be able to escape from the cohesive R&D alliance network by seeking new partners conducting other activities (e.g., manufacturing activities).     

Shared knowledge, “glitches,” and product development performance

Much recent thought in strategy has stressed the importance of organizational integration for competitive advantage. Empirical studies of product development have supported this emphasis by correlating integrating practices and superior performance. We propose, from a resource‐based or capability view, that this correlation results from integration leading to patterns of shared knowledge among firm members, with the shared knowledge constituting a resource underlying product development capability. To explore this connection, we examine the product development efforts of a scientific software company. We define the ‘glitch’ as a costly error possible only because knowledge was not shared, and measure the influence of glitches on firm performance. At this company, gaps in shared knowledge did cause the company to incur significant excess costs. We also identify a set of ‘syndromes’ that can lead to glitches, and measure the relative importance of these syndromes. The glitch concept may offer a general tool for practical measurement of the marginal benefits of shared knowledge. Copyright © 1999 John Wiley & Sons, Ltd.     

Standardization Alliance Networks,Standard-Setting Influence,and New Product Outcomes*

Standardization alliances evolve through collaborations among firms for developing and implementing industry technical standards. Cooperative standard setting can help allied firms to gain access to external knowledge and technologies, but it is unclear how the configuration of a standardization alliance can result in improving a firm’s performance in new product development. This study examines how standardization alliance network-based resource advantages vary across a firm’s network position and the firm’s ability to influence industry standard setting and new product outcomes. Empirical analyses, based on archival data from 170 Chinese automobile manufacturers from 1999 to 2013, indicate that firms that span structural holes in standardization alliance networks gain an advantage when focusing on early new product introductions but suffer a disadvantage when aiming at more innovative products. In contrast, taking a central position in standardization alliance networks is negatively related to a firm’s speed in bringing new products to market but positively related to the firm’s new product introduction rate. Further, standard-setting influence significantly mediates the effect of network position on a firm’s new product speed to market. Increasing centrality and structural holes can lead to the improvement of a firm’s standard-setting influence, and this, in turn, positively affects speed to market.     

Network location and learning: the influence of network resources and firm capabilities on alliance formation

This paper presents a dynamic, firm‐level study of the role of network resources in determining alliance formation. Such resources inhere not so much within the firm but reside in the interfirm networks in which firms are placed. Data from extensive fieldwork show that by influencing the extent to which firms have access to information about potential partners, such resources are an important catalyst for new alliances, especially because alliances entail considerable hazards. This study also assesses the importance of firms’ capabilities with alliance formation and material resources as determinants of their alliance decisions. I test this dynamic framework and its hypotheses about the role of time‐varying network resources and firm capabilities with comprehensive longitudinal multi‐industry data on the formation of strategic alliances by a panel of firms between 1970 and 1989. The results confirm field observations that accumulated network resources arising from firm participation in the network of accumulated prior alliances are influential in firms’ decisions to enter into new alliances. This study highlights the importance of network resources that firms derive from their embeddedness in networks for explaining their strategic behavior. Copyright © 1999 John Wiley & Sons, Ltd.     

A social network analysis of leading semiconductor companies’ knowledge flow network

This study (1) constructs a knowledge flow network for leading semiconductor companies; (2) seeks out how leading semiconductor companies can attain knowledge competencies (through patent activities or network position) via social network analysis; and (3) proposes critical strategic suggestions regarding knowledge flow networks in the industry. The results show (1) that a knowledge flow network with no isolators and Asian semiconductor firms are closely connected with other firms all over the world; (2) that patent activities are positively associated with central network positions and firm performance; (3) that closeness centrality is helpful for patent citation activities and also helps to achieve better performance; and (4) that semiconductor companies in Asia are also closely connected with others in the world.     

Firm growth,adaptive capability,and entrepreneurial orientation

Research summary: This paper posits adaptive capability as a mechanism through which a firm's prior growth influences the exhibition of future entrepreneurial action. Defined as the firm's proficiency in altering its understanding of market expectations, increased adaptive capability is a consequence of the new resource combinations that result from expanding organizational boundaries. Increased adaptive capability in turn corresponds to expansion of entrepreneurial activity, as firms increase their entrepreneurial orientation as the strategic mechanism to capitalize on their improved understanding of market conditions. We find support for our research model in a two‐study series conducted in South Korea and the United Kingdom. Managerial summary: Most would agree that entrepreneurially oriented firms—being innovative, entering new markets, and taking risk—grow faster. But how a firm becomes entrepreneurial is a complicated question. In this study, we flipped the growth relationship around and found support for growth contributing to a firm's entrepreneurial orientation. But between growth and being more entrepreneurial is the firm's ability to recognize changes in market expectations. We argue that as a firm grows, it acquires new resources and new knowledge of how to use those resources. These new resource combinations increase its ability to recognize changes in market expectations—its adaptive capability. This capability uncovers new entrepreneurial opportunities for value creation. To capture this potential value, firms expand their entrepreneurial orientation. Copyright © 2016 John Wiley & Sons, Ltd.     

Development of Novel Products Through Intraorganizational and Interorganizational Networks

The pendulum appears to be swinging away from the merger mania of the 1980s, with many leaner-and meaner organizations refocusing on their core competencies. However, these more focused organizations often lack the breadth of skills and expertise necessary for developing products and services which cut across traditional technological and marketing boundaries. Complex product systems such as those under development in the home automation industry include elements from such disparate sectors as consumer electronics, telecommunications, construction, and energy. A narrow focus may prevent the novel forms of innovation necessary for successful development of such products. Using the home automation industry as an example, Joe Tidd examines the challenges involved in the development of complex product systems. When products and services cut across traditional marketing and technological boundaries, radical innovation is difficult because different firms and industries are typically responsible for developing the various subsystems and components. Successful development efforts may require novel forms of innovation–for example, architectural innovation and technology fusion. Architectural innovation involves changes in the way the components of a product are linked together, but leaves the core design concepts untouched. Technology fusion creates new products and market opportunities through the blending of diverse technologies from various fields. Two organizational factors affect a firm's ability to develop and commercialize new products based on novel forms of innovation: the internal organization of the firm, and the firm's links with other organizations, including suppliers, customers, and networks of collaborating organizations. Within a firm, the development of complex product systems is likely to require managing across traditional product-division boundaries. The breadth of competencies required may necessitate strong interfirm linkages. Comparing organizational approaches and the networks of alliances for home automation in the United States, Europe, and Japan, it appears that European firms tend to be more narrowly focused then American and Japanese firms. A rigid focus on core competencies may cause these European firms to overlook the potential for new products. Because various technologies and industries are involved, open networks are more effective than closed networks or alliances. European and American firms tend to favor closed strategic alliances, while Japanese firms typically participate in open networks and overlapping consortia. This approach gives Japanese firms an edge in the home automation industry.     

Knowledge diversity and coordination: The effect of intrafirm inventor task networks on absorption speed

Research Summary: We combine the absorptive capacity and social network theory approaches to predict how intrafirm “whole” network characteristics affect the firm's speed of absorption of external knowledge to produce inventions. We start from the widely accepted view that distant, externally‐developed knowledge is difficult to absorb into the focal firm's own knowledge production. We suggest that high levels of intrafirm inventor task network diversity and task network density are essential for a diversity of knowledge inputs and coordinated actions regarding knowledge transfer, which in turn, reduces problems related to the absorption of knowledge—especially in the case of knowledge that is distant from the focal firm. The results of an event history study of 113 pharmaceutical firms that engaged in technology in‐licensing from 1986 to 2003 provide general support for our hypotheses. Managerial Summary: Firms keen to keep up with an uncertain and ever‐changing industry environment, can benefit from the speedy introduction of inventions. We examine how firms absorb licensed‐in technologies to nurture the rapid development of own related inventions. We show that a firm's absorption speed depends on the characteristics of the internal collaboration networks among the firm's inventor employees. More specifically, technologically diverse and well‐connected inventor networks improve the firm's ability to absorb external technologies quickly. This applies especially to externally acquired technologies that are unfamiliar to the firm. Depending on the distance of the acquired technology from the focal firm combined with speed‐inducing inventor network characteristics, our estimates suggest that firms can reduce the time needed for absorption by several months.     

Managing New Product Development Teams in a Globally Dispersed NPD Program

Globalization is a major market trend today, one characterized by both increased international competition as well as extensive opportunities for firms to expand their operations beyond current boundaries. Effectively dealing with this important change, however, makes the management of global new product development (NPD) a major concern. To ensure success in this complex and competitive endeavor, companies must rely on global NPD teams that make use of the talents and knowledge available in different parts of the global organization. Thus, cohesive and well‐functioning global NPD teams become a critical capability by which firms can effectively leverage this much more diverse set of perspectives, experiences, and cultural sensitivities for the global NPD effort. The present research addresses the global NPD team and its impact on performance from both an antecedent and a contingency perspective. Using the resource‐based view (RBV) as a theoretical framework, the study clarifies how the internal, or behavioral, environment of the firm—specifically, resource commitment and senior management involvement—and the global NPD team are interrelated and contribute to global NPD program performance. In addition, the proposed performance relationships are viewed as being contingent on certain explicit, or strategic, factors. In particular, the degree of global dispersion of the firm's NPD effort is seen as influencing the management approach and thus altering the relationships among company background resources, team, and performance. For the empirical analysis, data are collected through a survey of 467 corporate global new product programs (North America and Europe, business‐to‐business). A structural model testing for the hypothesized effects was substantially supported. The results show that creating and effectively managing global NPD teams offers opportunities for leveraging a diverse but unique combination of talents and knowledge‐based resources, thereby enhancing the firm's ability to achieve a sustained competitive advantage in international markets. To function effectively, the global NPD team must be nested in a corporate environment in which there is a commitment of sufficient resources and where senior management plays an active role in leading, championing, and coordinating the global NPD effort. This need for commitment and global team integration becomes even more important for success as the NPD effort becomes more globally dispersed.     

Cooperation and the Ability to Minimize the Time and Cost of New Product Development within the Spanish Automotive Supplier Industry

New product development (NPD) cycle time has become a strategic competitive weapon for corporations and a focus for research on product development management. Reducing NPD cycle time may create relative advantages in market share, profit, and long‐term competitiveness. This article follows recent research that already has moved beyond anecdotes and case studies to test factors empirically and variables that are associated with the company's NPD time and cost minimization abilities. One emerging research area is the impact of comprehensive lists or sets of firm variables (not project variables) on the ability to speed up NPD. At the same time, several authors' findings suggest a contingency approach to speeding up innovation. Contingency theory argues that there is not one “best answer” to a particular problem: Instead, the appropriateness of managerial interventions is dependent on the prevailing conditions that surround that problem. On the issue of NPD, several scholars point out that cooperation accelerates learning and product development: Firms that combine resources can gain a competitive advantage over firms that are unable to do so, and this is viewed as one of the key benefits of interfirm cooperation. A firm's network of cooperations represent a valuable resource that can yield differential returns in the same way as other tangible and intangible assets such as product brands or R&D capabilities. Combining both lines of research, this study seeks to add to the growing literature and further to inform practicing managers in speeding up NPD by analyzing the relationship between cooperation and the use of some NPD firm practices. This article shows the results of a survey of 63 Spanish automotive suppliers to test the moderation effect of cooperation in the relationship between the use of NPD firm practices and the company's NPD time and cost minimization abilities. Factor and regression analyses were used to test the article's hypotheses. It was found that high‐cooperation companies used more intensively sets of firm practices than low‐cooperation companies. It also was found that two out of four identified factors of NPD firm practices—Design‐Manufacturing Interface and Cross‐Functional Design—were related positively to the company's NPD time and cost minimization abilities in the subsample of high‐cooperation companies but not in the low‐cooperation companies. These results support late research in the area of speeding up NPD. The article discusses some implications for managers.     

Individual performance in a coopetitive R&D alliance: motivation,opportunity and ability

This study examines individual knowledge sharing in a coopetitive R&D alliance. R&D is increasingly carried out in an R&D alliance setting, where individuals share highly specialized tacit knowledge crossing firm boundaries. A particular challenging setting is the coopetitive R&D alliance, where partner firms partially compete and individuals may leak competitive knowledge. This setting has been studied on the level of the partner firm. We want to deepen insights by examining the individual level. Drawing on the motivation‐opportunity‐ability framework, we study the influence of individuals’ job experience (ability) on their performance in the alliance. We also examine effects of two‐ and three‐way interactions between job experience, a central position in the social alliance network (opportunity) and intrinsic and extrinsic motivation. We find a positive association of job experience with individual performance, a positive interaction between job experience and extrinsic motivation and a positive three‐way interaction between job experience, central network position and intrinsic motivation, and discuss the impact of these findings.     

Benefiting from network position: firm capabilities,structural holes,and performance

While strategy scholars primarily focus on internal firm capabilities and network scholars typically examine network structure, we posit that firms with superior network structures may be better able to exploit their internal capabilities and thus enhance their performance. We examine how innovative capabilities—both those of focal firms and those they access through their networks—influence the performance of Canadian mutual fund companies. We find that a firm's innovative capabilities and its network structure both enhance firm performance, while the innovativeness of its contacts does not do so directly. Innovative firms that also bridge structural holes get a further performance boost, suggesting that firms need to develop network‐enabled capabilities—capabilities accruing to innovative firms that bridge structural holes. Copyright © 2005 John Wiley & Sons, Ltd.     

Innovation in a global consulting firm: when the problem is too much diversity

This paper explores how individual managers in multinational firms utilize their informal relations to create new knowledge. Specifically, how does the density of informal networks affect an actor's ability to access and integrate diverse information and consequently that actor's innovation performance? The arguments are developed using the setting of 79 senior partners in a global management consulting firm and tested on a dataset of 1,449 informal relationships. I distinguish between internal, external, local, and global relations and find that this separation permits a more nuanced understanding of the effect of network structure on innovation performance. Specifically, I argue that the most effective network strategy is contingent upon the context in which the partners operate. The findings show that partners operating in homogeneous contexts, where the primary challenge is to access diverse information, benefit from low‐density networks. In contrast, when crossing both firm and geographic boundaries, partners with dense networks have higher innovation performance. I argue that in such heterogeneous contexts, dense network interactions facilitate partners' ability to integrate the diverse information to which they are exposed. Copyright © 2010 John Wiley & Sons, Ltd.     

Firm–specific competencies determining technological innovation: A survey in Greece

This paper investigates the ‘importance’ and ‘awareness’ of firm–specific competencies as determinants of technological innovation in the context of a European newly industrialised country. A literature–based portfolio model was developed including 17 established innovation–determining factors, related to the firm’s technical, market, human resource and organisational competencies. The ‘importance’ of those factors as determinants of innovation in the Greek industry was tested with a survey of 105 manufacturing firms. Using correlation and regression analyses the author classified the competencies into ‘major importance’, ‘moderate importance’ and ‘unimportant’ ones. ‘Major importance’ determinants of innovation included the intensity of R&D, strength in marketing, proportion of university graduates and engineers in the staff, proportion of staff with managerial responsibility, proportion of professional staff with previous experience in another company and incentives offered to the employees to contribute to innovation. The ‘awareness’ of the important competencies differentiating Greek innovative companies was tested by comparing the above ‘objective’ results with the perceptions of the responding managers. The perceptual analysis confirmed the importance of the statistically–driven variables at the aggregated level. At the level of the individual variables, a number of inconsistencies were identified. The managers overestimated the importance of international work experience of professional staff and of training and underestimated the importance of the potential contribution of shop–floor employees. Relating the results to the Greek institutional context, the study’s general finding was that the important determinants of innovation were scarce in the Greek business environment. The highly innovative companies were the ones to overcome country–specific innovation barriers, such as negligible industrial R&D, general weakness in marketing, outdated educational system, limited labour mobility and cultural problems with involving shop–floor employees in the innovation process.     

Reassessing the fundamentals and beyond: Ronald Coase,the transaction cost and resource‐based theories of the firm and the institutional structure of production

In this paper, three points are argued. The first is that Ronald Coase, best known as the forefather of transaction cost theory, foresaw many of the critical questions that proponents of the resource‐based view are concerned with today. The second is that resource‐based theory plays a potentially much more critical role in economic theory and in explaining the institutional structure of production than even many resource‐based scholars recognize. The last point is that a more complete understanding of the organization of economic activity requires a greater sensitivity to the interdependence of production and exchange relations. The arguments presented in this paper highlight important, but relatively ignored, elements in Coase's work that inform strategy research. More importantly, this paper makes the case for a triangular alignment between the triumvirate of governance structure, transaction, and resource attributes and demonstrates how the identity and strategy of a particular firm influences how its resources interact with the transaction and how the firm chooses to govern it. The general argument is then applied to the context of interfirm collaborative relations, where the key focus is broadened from just cost to also include skills/knowledge and the interdependence between cost and skills with respect to firm boundaries, both in terms of choice and nature. Such a broadening of focus enables us to additionally examine the transacting process as a productive endeavor, which underpins the co‐evolution of the competencies of partner firms. Copyright © 2002 John Wiley & Sons, Ltd.     

COST,VALUE AND FOREIGN MARKET ENTRY MODE: THE TRANSACTION AND THE FIRM

This paper compares and contrasts the mode of foreign market entry decision from the transaction cost/internalization and organizational capability perspectives. Each of these perspectives operates at a different level of analysis, respectively the transaction and the firm, and consequently differs in the primary arena of attention, namely transaction characteristics and the capabilities of firms. In making the comparison, a key distinction is made between the cost and the value aspects in the management of know-how, based on which issues pertaining to the transfer of knowledge within and across firm boundaries and the exploitation and enhancement of competitive advantage are closely examined. The main purpose of this paper is to demonstrate the implications of a shift in frame from cost to value in the analysis of decisions related to firm boundaries. Entry into foreign markets is used primarily as a vehicle for the accomplishment of this purpose. The paper shows how the value-based framework of the organizational capability perspective radically and fundamentally shifts the approach towards the governance of firm boundaries and argues that, even though TC/internalization theory raises some valid concerns, the organizational capability framework may be more in tune with today’s business context. Some of the assumptions of the TC/internalization perspective, both direct—–opportunism, exploitation of existing advantage—and indirect—preservation of the value of know-how across locational contexts, asymmetry between bounded rationality for transaction and production purposes—are critically examined and questioned. Implications of a shift from a cost to a value-based framework are discussed and the need for a shift in research focus is emphasized. © 1997 by John Wiley & Sons, Ltd.     

Value creation by knowledge‐based ecosystems: evidence from a field study

A growing number of research and development‐driven companies are located in knowledge‐based ecosystems. Value creation by these ecosystems draws on the dynamics of single firms (interacting and partnering) as well as the ecosystem at large. Drawing on a field study of a Dutch high‐tech campus, two key sources of value creation are identified: (1) facilitation of the innovation process for individual companies and (2) creation of an innovation community. Furthermore, the coevolution of the ecosystem's business model with firm‐level business models explains why technology‐based firms join, stay in, or leave the ecosystem at a certain point in time. A remarkable finding is that ecosystem managers have to deliberately facilitate exit routes for companies that no longer fit the ecosystem in order to enhance and reinforce its business model. As such, this study suggests a dynamic capability perspective on knowledge‐based ecosystems that need to develop a business model at the ecosystem level to create sufficient innovative capacity and entrepreneurial fitness.     

Strategy,human capital investments,business‐domain capabilities,and performance: a study in the global software services industry

Research summary : In knowledge‐based industries, continuous human capital investments are essential for firms to enhance capabilities and sustain competitive advantage. However, such investments present a dilemma for firms, because human resources are mobile. Using detailed project‐level operational, financial, and human capital data from a leading multinational firm in the global IT services industry, this study finds that deliberate investments in improving general human capital can help firms develop superior capabilities and maintain high profits. This paper identifies two types of capabilities essential for success in this industry—technological and business‐domain capabilities—and provides empirical evidence justifying such investments. Theoretical and practical implications of capability‐seeking general human capital investments are discussed. Managerial summary : The primary managerial implication of this research is that capability‐seeking investments in developing general human capital through strategic learning (training and internal certifications) can enhance firm performance. Although investing in general human capital is risky, the firm considered this a strategic necessity in order to thrive in the fast paced IT services industry. By leveraging general technological skills in combination with business‐domain knowledge to address customer's business problems firms can earn and sustain higher profits. Our study also demonstrates how a developing‐country firm responded to strong competitive challenge from global rivals possessing superior capabilities by upgrading the capabilities of its employees through internal development. In doing so the firm was able to narrow the capability gap vis‐à‐vis its foreign peers and expand its business globally. Copyright © 2016 John Wiley & Sons, Ltd.