Network patterns and competitive advantage before the emergence of a dominant design

This study examines the performance implications of the alliance networks of 49 firms that competed for two technology standards in the U.S. local area network industry from 1989 to 1996. During the race to define a dominant design, individual firms attract the suppliers of complements by building alliance networks to favor the firms' preferred technology standard. Controlling for the number of suppliers in each technology standard community and the extent of technical progress achieved by individual firms, the panel data analysis shows that central firms with high ego network density, coupled with a strategic intent to acquire and share knowledge broadly within the technological community, achieve better innovation performance. The size of the technological community and some random events in the early formation of the industry do not provide a sufficient explanation of how these firms gain the diverse support of suppliers or enhance their competitive advantage. By demonstrating the independent and contingent effects of alliance network properties, this study explains how network patterns might enhance or limit the benefits of alliance networks when focal firms embrace different innovation strategies. Copyright © 2009 John Wiley & Sons, Ltd.     

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.     

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.     

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.     

Strategic alliances as social capital: a multidimensional view

Defining social capital in terms of the information benefits available to a firm due to its strategic alliances we present a theory of social capital that conceptualizes it as a multidimensional construct. We draw from the literature to argue that social capital yields three distinctly different kinds of information benefits in the form of information volume, information diversity, and information richness. This extends current theoretical and empirical research by specifying and empirically demonstrating three interrelated yet distinct dimensions of social capital. Firms vary in their levels of social capital not just on their structural position in an alliance network but also in the dynamics that underlie alliance formation and maintenance. More importantly, the different dimensions of social capital theoretically provide differential benefits. We establish the construct validity of our proposed three‐dimensional conceptualization of social capital using longitudinal data on the population of strategic alliances formed during the period 1980–94 by firms in the global steel industry. In addition, we establish predictive validity by demonstrating that the information dimensions have differential effects on firm performance, using firm nationality as a contingency. Copyright © 2002 John Wiley & Sons, Ltd.     

Can entrepreneurial orientation improve R&D alliance performance? An absorptive capacity perspective

Research and Development (R&D) alliance studies maintain that alliance partners’ entrepreneurial interactions that pursue innovation opportunities through collective exploitation and exploration of knowledge resources lead to alliance success. Despite the importance of productive resource exchange and generation through such interactions, performance-by-alliance mechanisms remain under-researched. In this study, we develop a theoretical framework hypothesizing that the entrepreneurial orientation (EO) of alliance firms, which underlies their approach to seeking and utilizing resources productively, has a potential impact on their R&D alliance performance, depending on their absorptive capacity (AC). To specify the value creation and capture mechanism in the alliance, we adopt two performance indicators: technological competitiveness and business performance. Findings from a study of 218 small technology-intensive firms conducting R&D alliance projects show that EO translates into business performance through technological competitiveness and that AC leverages the alliance performance implications of EO. The results suggest that EO–AC complementarity is a strategic stimulant that triggers firms to extract greater benefits from R&D alliances.     

Networks in transition: how industry events (re)shape interfirm relationships

Interfirm relationship networks are strategic resources that can potentially be shaped by managerial action. As a first step towards understanding how managers can shape networks, we develop a framework which explains how industry networks evolve over time and in response to specific events. Our main thesis is that industry events may be either structure-reinforcing or structure-loosening, and that their potential structural impact may be predicted in advance. We validate our hypotheses with longitudinal data on the strategic alliance network in the global steel industry. © 1998 John Wiley & Sons, Ltd     

Fit by adaptation or fit by founding? A comparative study of existing and new entrepreneurial cohorts in China

Extant research provides ambiguous views on the network adaptability of existing ventures and new ventures during environmental change. Applying an institutional perspective, this research aims to provide a clearer picture by comparing the adaptation and network configurations of existing vs. new entrepreneurial cohorts during China's institutional change after 1992. The qualitative and quantitative analyses show that the existing cohort of entrepreneurs displays network inertia, in that they largely maintain strong tie‐based political and market networks; the new cohort instead demonstrates better adaptation by establishing fewer political networks but more weak and diverse market networks. This comparative research unpacks the institutional mechanisms underlying such differences, and serves as a ground for future investigations dealing with the strategic actions of different entrepreneurial cohorts that are largely neglected in previous studies. Copyright © 2014 John Wiley & Sons, Ltd.     

Leveraging ties: the contingent value of entrepreneurial teams' external advice networks on Indian software venture performance

This study investigates the impact of entrepreneurial teams' external networks on their ventures' performance. We first argue that ventures whose entrepreneurial teams span many structural holes in their external advice networks experience higher performance. We then propose that network ties are not uniform in their effect, but rather are contingent on two distinct features of entrepreneurial teams: (i) their strategic consensus—extent of agreement on key goals and strategies within the team—and (ii) internal cohesion—extent of interpersonal friendships within the team. Finally, we propose that team demographics and team networks complement (rather than substitute) each other. Data from Indian software ventures provide support for these arguments. We extend entrepreneurship research by highlighting how venture teams' internal processes and external networks jointly shape performance outcomes. We also add to the literature on team networks by drawing attention to the role of strategic consensus as a distinct pathway through which teams can leverage their external networks.     

The Formation of Managerial Networks of Foreign Firms in China: The Effects of Strategic Orientations

This study investigates how firms' strategic orientations (i.e., market, technology, and entrepreneurship orientations) influence the formation of two types of managerial networks (top managers' ties with the business community and with government officials), as well as the impact of managerial networking on firm performance. On the basis of a survey of 181 foreign-invested enterprises (FIEs) operating in China, we find that a market orientation fosters both types of network building. Technology-oriented firms are more likely to cultivate managerial ties with top managers at other firms but less likely to establish networks with government officials. In contrast, entrepreneurial firms tend to develop vertical networks with government officials but have no intention to deepen their horizontal networks with other firms. Competitive intensity moderates the relationships between strategic orientations and managerial ties. Finally, managerial networking has a positive impact on FIE performance.     

Growing with the market: How changing conditions during market growth affect formation and evolution of interfirm ties

Research Summary: Market conditions are known to matter for firm performance and growth. This study explores how changing levels of uncertainty and competition affect interfirm ties of entrepreneurial firms as markets transition from nascent to growth stage. Tracing six entrepreneurial game publishers during the growth stage of the U.S. wireless gaming market, the findings reveal that in a growth stage market, as uncertainty decreases, certain ties of entrepreneurial firms are terminated. First, existing partners may cut ties and become competitors after entering the market directly. This is a “winner's curse” as more successful firms are more likely to entice their partners to enter the market directly. Second, ties may be terminated as prominent firms that are “overwhelmed” with too many partners cut ties with low to mediocre performance, while their remaining partners enter a positive spiral of tie strength and performance. Finally, as uncertainty decreases, new firms may enter the market as competitors to prominent firms. While entrepreneurial firms with high‐ and low‐performing ties to prominent partners may find ties with these new entrants attractive, those with mediocre ties to few prominent partners find this move too risky and wait for a first mover to legitimate it. Overall, the findings show that changing levels of uncertainty and competition in growth stage markets can have different consequences for firms due to heterogeneity in their ties and power relative to partners. The findings provide several contributions to literature regarding the relationship among interfirm ties, firm performance, and market evolution. Managerial Summary: Based on interviews at six entrepreneurial game publishers in the United States and their partners, this study shows how changing levels of uncertainty and competition in growing markets can have different consequences for firms based on the different types of alliances in their portfolio and their power relative to partners. The findings highlight the importance of managing partners differently based on alliance type and goal of the partner. They advocate remaining flexible in alliance management as information asymmetries, intentions and bargaining power of partners can change and lead to abrupt alliance dissolution. They show that alliance portfolio management goes beyond a firm's capability of managing individual alliances, and provide a tool for managers to evaluate their alliance portfolios and take the necessary precautions.     

Local versus global mimetism: the dynamics of alliance formation in the automobile industry

The alliance dynamics among the 35 largest firms in the worldwide automobile industry indicates that the likelihood of an alliance between any two firms depends on the local density of alliances among the members of their strategic groups, rather than on the global density of alliances in the industry. These results suggest that firms most closely observe and imitate the strategic behavior of firms who occupy the same strategic niche rather than the behavior of firms in their industry defined more broadly. Copyright © 2002 John Wiley & Sons, Ltd.     

Leveraging micro‐ and macro‐structures of embeddedness in alliance networks for exploratory innovation in biotechnology

Researchers agree that alliance networks can be an important instrument in a firm's innovation process, but there is limited empirical evidence on actually how they facilitate the creation of new knowledge for exploratory innovation. The research question is what alliance network configuration is optimal for exploratory innovation. The present study investigated the interaction between a firm's alliance portfolio structure (the micro‐level) and the industry alliance network structure (the macro‐level), and it empirically tested how their interaction may be affecting the exploratory innovation outcome of network participating firms in the biotechnology industry. The paper uses data from exploratory patents filed by 455 dedicated biotechnology firms in 1986–1999 and an overall network comprising 2,933 technological alliances over the same period. The results indicate that, in the case of biotechnology, firms with high exploratory innovation output have short path indirect access to many other firms (micro‐level), and operate in dense industry alliance networks centralized around a few key firms (macro‐level), and that these effects are curvilinear.     

Network development and firm growth: A resource-based study of B2B Born Globals

Using multiple case studies, we explore how Born Global networks develop as the firm's internal resources grow. Building on networks and entrepreneurship research, we develop a theoretical framework and advance five propositions that link resource development and entrepreneurial orientation to network content, structure, centrality, and management. We also explore the benefits that Born Globals gain from this development. Key findings include: resource accumulation and network development have a strong relationship while network content becomes increasingly strategic; strong entrepreneurial orientation coincides with calculative network management; network benefits are not always advantageous to the firms. This study makes empirical contributions to Born Global and Networks research in the context of Business-to-Business firms, and provides practical implications for Entrepreneurs and Born Global managers.     

An examination of the effects of venture capitalists on the alliance formation activity of entrepreneurial firms

Research Summary : Alliances offer benefits such as access to capital, knowledge, and markets. Yet, due to their lack of legitimacy, entrepreneurial firms find it challenging to engage in alliances. Thus, it is important to examine which factors may drive alliance formation for entrepreneurial firms. We examine whether the presence of venture capitalists (VCs) is such a factor. Whereas current research suffers from endogeneity concerns that make the comparison of VC- and non-VC-backed firms problematic, our empirical design reduces this problem. Overall, we find that the presence of a VC and a VC's experience with taking firms public are positively associated with entrepreneurial firms’ alliance formation, and that VCs are more active in forming an alliance when the exit outcome is an acquisition, rather than going public. Managerial Summary : Alliances can be of fundamental importance to the growth of entrepreneurial firms. However, because entrepreneurial firms hold limited resources, their access to alliances may be limited. We study whether entrepreneurial firms backed by venture capitalists (VCs) are more likely to enter into alliances than firms without VC backing. A major problem with this sort of analysis is that VCs may cherry pick the best firms, which in turn are more likely to engage in alliances to begin with, irrespective of VCs. Accordingly, we control for the quality of funded firms, and therefore, isolate the VCs’ contribution to alliance formation. In doing so, we find support for the importance of the role VCs play in entrepreneurial firms’ alliance formations.     

Alliance portfolios and firm performance: A study of value creation and appropriation in the U.S. software industry

This study reveals the multifaceted contribution of alliance portfolios to firms' market performance. Extending prior research that has stressed the value‐creation effect of network resources, it uncovers how prominent partners may undermine a firm's capacity to appropriate value from its alliance portfolio. Analysis of a comprehensive panel dataset of 367 software firms and their 20,779 alliances suggests that the contribution of network resources to value creation varies with the complementarity of those resources. Furthermore, the relative bargaining power of partners in the alliance portfolio constrains the firm's appropriation capacity, especially when many of these partners compete in the focal firm's industry. In turn, the firm's market performance improves with the intensity of competition among partners in its alliance portfolio. These findings advance network research by highlighting the trade‐offs that alliance portfolios impose on firms that seek to manage and leverage their alliances. Copyright © 2007 John Wiley & Sons, Ltd.     

The influence of network effects on SME performance

The notions that firms are embedded within complex networks, and that managers spend time actively networking, have long been accepted by scholars within the Industrial Marketing and Purchasing (IMP) Group. However, an issue that has not received the same attention is an assessment of how these two facets; network structure and external networking behaviors affect SME performance. In assessing their antecedents, in this research we move beyond the traditional IMP literature, using emotional intelligence and entrepreneurial style to assess CEOs' managerial style. Network structure was assessed by the extent to which structural holes and degrees of centrality were present. Data was collected from 227 CEOs of small Iranian information technology companies. To test our hypotheses, we combined the use of structural equation modeling and social network analysis — a dual methodology that has not been adopted before. The results show that emotional intelligence drives entrepreneurial style, network structure and external networking behavior. SME performance is influenced by both network structure and external networking behavior. The mediating role of network structure is also discussed. Here our results show that entrepreneurial style does not influence external networking behavior. Several managerial implications of these findings are discussed.     

Informational Networks, Entrepreneurial Action and Performance

This paper develops a model that incorporates personal and business networks, firm action, and performance based on the existing literature. It explores the links between information and entrepreneurial-type action, and action and performance. Survey data was collected from a sample of 100 manufacturing firms in Thailand. Results show that entrepreneurs value the information they receive from their networks. However, there is little statistical support for tangible links between personal or business networks and entrepreneurial action and performance, or between action and performance.     

Structural homophily or social asymmetry? The formation of alliances by poorly embedded firms

Recent research shows that preexisting network structure constrains the formation of new interorganizational alliances. Firms that are poorly embedded in a network structure are less likely than richly embedded firms to form alliances, because they lack informational and reputational benefits. This study examines the types of ties that poorly embedded firms can form to overcome the constraints that their structural positions impose, in turn helping to explain how firms' actions can transform existing network structures. We argue that poorly embedded firms are more likely to participate in ties characterized by social asymmetry than in ties characterized by structural homophily. We analyze the terms of trade that socially asymmetric partners negotiate for alliance governance and discuss how such alliances influence network dynamics. To test our arguments, we use longitudinal data on the alliance activities of 97 global chemical firms from 1979 to 1991. Copyright © 2009 John Wiley & Sons, Ltd.